IRLF 


INTRODUCTORY    BOOKKEEPi 


F.  c.  WEBER 


I 

uO 
CJ> 


LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 


GIFT    OF 


Class 


Introductory  Bookkeeping 

*• 

Arranged  for  use  in  the  classes 
of  the 

COMMERCIAL  DEPARTMENT 

of  the 

LOS  ANGELES   POLYTECHNIC  HIGH  SCHOOL 

BY 

F.  C.  WEBEK 

ALL   RIGHTS   RESERVED 


Published  by  the  Author 
Los  Angeles,  California.  1907 


Copyrighted  1906,  by 
Fred  C.  Weber 


Copyrighted   1907,  by 
Fred  C.  Weber 


INDEX 

Page 

Accounts   1 

Accounts — Ruling  of   28 

Bank  Discount 34 

Bills  Payable   19 

Bills  Receivable   19 

Bookkeeping 1 

Business   Transaction    1 

Buying  on  Account   7 

Cash  Accounting  Closing  , 30 

Cash  Balance  in  Trial  Balance  40 

Cash  Book 36 

Cash  Book — Posting  From 40 

Cash  Defined 1 

Checking 17 

Commission  Business    43 

Consignment  Accounts   43 

Consignment  Account  Analysis    47 

Corporation   Exercises    58-59-61-63 

Credit  3 

Debit 3 

Discount 31 

Drayage — How  Charged 18 

Expense  Account  Analysis   23 

Expense  Account  Closing    29 

Expense  Account  Defined   5 

Freight — How  Charged  18 

Gain  Explained   24 

Interest   31 

Inventory  Explained    -. 23 

Inventory — Transfer  of  28 

Journalizing  Explained  12 

Ledger  Defined   3 

[Continued] 


236568 


INDEX— Continued 

Page 

Ledger  Closings    27 

Liabilities 22 

Losses  Explained    24 

Loss  and  Gain  Account 29 

Loss  and  Gain  Statement  Routine 21 

Merchandise  Account  Analysis   23 

Merchandise  Account  Closing 28 

Merchandise  Defined   1 

Notes IS 

Personal  Accounts   6 

Posting  Routine  14-16 

Present  Worth 2?, 

Proof  of  Statements 25 

Proprietor's  Account  Closing  29 

Proprietor's  Investment 7 

Purchases  on  Account 7 

Real  Estate  20 

Resources  and  Liabilities  26 

Resources  and  Liabilities  Statement  Routine  22 

Reviews  47-48-49-51-52 

Ruling  of  Accounts   .  .28 

Sales  on  Account  7 

Sets,  A.  J.  Laws  14 

Cash  Book    38 

James  D.  Norton 7 

J.  Oscar  Dwight 17 

Shipping  and  Commission  44 

Shipment  Accounts    44 

Shipment  Accounts — Analysis  of   46 

Trial  Balance  8 

Trial  Balance  by  Differences  21 

Value  .  . .  1 


ACCOUNTS 
I. 

Suppose  you  go  to  a  store  and  buy  a  hat,  paying  $5.00  in 
cash  for  it.  You  receive  a  hat  and  you  give  money.  Any- 
thing which  can  be  used  to  buy  with,  or  that  costs  something  to 
obtain,  has  value.  Value  is  purchasing  power.  The  hat  is  of 
value  to  you — it  costs  you  $5.00;  it  was  of  value  to  the  storekeeper 
for  it  secured  for  him  your  $5.00.  The  $5.00  was  of  value  to 
you,  it  secured  for  you  something  that  you  need ;  it  is  of  value  to 
the  storekeeper,  he  can  use  it  to  secure  something  which  he  needs. 
So  we  find  in  this  transaction  an  exchange  of  values. 

Money  is  the  standard  by  which  we  measure  value.  We 
measure  the  worth  of  the  hat  by  saying  it  has  a  value  of  $5.00. 

There  is  a  value  received  or  promised  for  receipt  and  a  value 
given  or  promised  to  be  given  in  every  business  transaction.  A 
BUSINESS  TRANSACTION  is  an  actual  or  promised  ex- 
change of  goods,  property  or  other  representatives  of  value. 

BOOKKEEPING  is  the  keeping  of  a  systematic  record  or 
history  of  the  transactions  of  a  business.  We  must  bear  in 
mind  that  this  record  or  history  is  of  and  for  the  business  and 
not  of  the  men  conducting  the  business.  In  double  entry  book- 
keeping, we  keep  track  of  both  the  values  received  or  promised 
for  receipt  and  the  values  given  or  promised  to  be  given.  In  do- 
ing this,  we  group  values  of  a  certain  kind  together  under  one 
head :  for  instance,  those  things  that  we  buy  for  the  purpose  of 
selling  again — things  that  we  "deal  in" — we  classify  as  merchan- 
dise; value  that  passes  from  hand  to  hand  as  money  and  in  the 
place  of  money,  we  classify  as  cash,  etc.  A  convenient  way  of 
keeping  track  of  the  different  values  is  to  write  down  the  name  of 
a  particular  kind  of  value  and  in  one  column,  on  the  left  hand 
side,  underneath  the  name,  set  down  what  all  values  of  that  class 
ccst,  or  their  worth,  as  they  are  received ;  in  another  column,  on 
the  right  hand  side,  underneath  the  name,  set  down  the  worth  of 
all  values  of  that  class  as  they  are  given  out  or  disposed  of. 


Example : 


Here  the  left-hand  column  shows  that  we  have  received  two 
different  lots  of  merchandise,  the  first  valued  at  $426.30,  the  sec- 
ond at  $216.23;  or  this  column  shows  us  that  merchandise  has 
cost  us  altogether  $642.53.  The  right-hand  column  shows  us 
that  we  have  given  out  or  disposed  of  three  different  lots  of  mer- 
chandise valued  at  $74.10,  $5.16  and  $32.20  respectively,  or  that 
of  the  merchandise  that  we  have  received,  we  have  disposed  of  a 
part  for  $111.46.  Remember  that  merchandise  is  usually  not 
sold  at  the  same  price  for  which  it  is  bought. 

The  business  must  have  given  some  form  of  value  for  this 
merchandise  which  has  been  received.  Let  us  suppose  we  paid 
cash.  We  parted  with  the  cash  in  order  to  get  the  merchandise, 
that  is,  the  merchandise  cost  us  cash,  and  cash  produced  for  us 
merchandise,  thus  merchandise  in  this  case  costs  value,  cash  pro- 
duces or  supplies  value.  Sometimes  instead  of  value  being  given 
at  once,  it  is  promised  for  a  future  delivery,  the  business  thus  as- 
suming an  obligation,  and  later,  when  the  value  is  actually  deliv- 
ered, the  business  redeems  its  obligation. 

The  above  arrangement  of  merchandise  bought  and  sold,  or 
similar  arrangements  for  keeping  track  of  values  of  a  particular 
class  or  kind,  is  called  an  account. 

An  account  costs  value  when  it  is  the  cause  of  the  business 
parting  with  some  other  form  of  value  or  of  the  business  assum- 
ing some  obligation.  A  account  produces  value  when  it  supplies 
the  business  with  some  other  form  of  value  or  redeems  an  obliga- 
tion for  the  business. 

It  is  often  very  necessary  to  know  WHEN  values  are  re- 
ceived or  given,  so  we  will  modify  the  above  record  by  giving 
the  date  in  each  case.  To  help  us  in  keeping  these  facts  in  a  neat 
and  orderly  manner  we  will  rule  lines  and  make  the  arrangement 
as  follows: 


x4£^ 

a. 

V 

3, 

c 

30 

{££ 

V 

7 

*/ 

'/0 

^ 

2 

/ 

t, 

33 

7 

-3 

'/{, 

* 

«a 

5 

•2. 

&> 

The  above  is  a  Merchandise  account.  The  items  set  down 
on  the  left-hand  side  are  called  DEBITS ;  those  on  the  right-hand 
side  are  CREDITS.  DEBIT  means  to  charge  or  to  enter  on  the 
left-hand  side  of  the  account.  CREDIT  means  to  place  on  the 
right-hand  side  of  the  account.  REMEMBER  that  we :  Debit  an 
account  when  its  costs  or  receives  value,  and  Credit  an  account 
when  it  produces  or  supplies  value.  The  book  in  which  accounts 
are  kept  is  called  the  "Ledger". 

You  should  now  be  able  to  answer  the  following  questions : 

What  is  meant  by  value  ? 

What  purpose  does  money  serve? 

What  is  a  business  transaction? 

Wrhat  is  bookkeeping? 

What  is  the  object  of  double  entry  bookkeeping? 

What  is  an  account?  * 

When,  does  an  account  cost  value? 

When  does  an  account  produce  value? 

What  is  meant  by  debit? 

What  is  meant  by  credit? 

II. 

You  will  now  take  two  sheets  of  letter  head  paper,  or  two 
half  sheets  of  foolscap,  and  rule  on  each  in  RED  ink  the  proper 
lines  for  one  account  as  shown  in  the  above  Merchandise  account. 
(Apply  to  your  teacher  for  instruction  on  the  correct  use  of  the 
ruler.)  Over  one  of  these  accounts,  equally  distant  from  the 
right  and  left  margins,  write  the  heading  "Merchandise";  over 
the  other  "Cash".  You  will  now  use  these  accounts  in  keeping 
track  of  the  values  received  or  given  in  the  following  transactions, 
which  are  taken  from  a  hay  and  grain  business : 


Jan.  i.  You  have  on  hand  $500  in  cash.  Place  this  amount 
in  the  debit  side  of  your  Cash  account  on  the  first  line.  Be  care- 
ful not  to  omit  the  date. 

Bought  for  cash  an  invoice  of  hay  amounting  to  $150. 

In  every  transaction,  ask  yourself  the  questions :  (i)  What 
account  costs  or  receives  value?  (2)  What  account  produces  or 
supplies  value?  REMEMBER  that  we:  Debit  the  account  that 
costs  or  receives  value,  and  Credit  the  account  that  produces  or 
supplies  value.  There  must  be  at  least  one  debit  and  one  credit 
item  for  each  transaction. 

Bought  for  cash  an  invoice  of  barley  amounting  to  $210. 

Sold  for  cash  an  invoice  of  hay  and  barley  amounting  to 
$36.50. 

Bought  for  cash  100  bu.  oats  at  $6c  per  bu. 

Sold  J.  D.  Snell,  for  cash,  2  tons  hay  at  $8.50  per  ton. 

Sold  for  cash  2  bu.  barley  at  6$c. 

2.  Bought  of  Jas.  Wilton,  for  cash,  2  tons  rolled  barley  at 
/5c  per  cwt. 

Sold  Smith  &  Swayne,  200  Ibs.  rolled  barley  at  8oc  per  cwt. 
10  tons  hay  at  $8.60  per  ton ;  received  cash  for  same. 

4.  Sold  the  Star  Livery  Co.,  for  cash,  25  tons  hay  at  $8.50 
per  ton ;  50  bu.  oats  at  4ic  per  bu. 

5.  Bought  of  C.  C.  Moore,  225  bu.  oats  at  35c  per  bu.,  paid 
for  same  in  cash. 

Sold  for  cash  50  Ibs.  rolled  barley  at  1^2  c  per  Ib. 

6.  Bought  for  cash  3  tons  of  hay  at  $5  per  ton. 
Sold  J.  D.  Snell,  for  cash,  10  bu.  oats  at  42c  per  bu. 

You  should  now  be  able  to  answer  the  following  questions : 
How  much  has  merchandise  cost  you? 
How  much  merchandise  have  you  sold? 
How  much  cash  has  been  received? 
How  much  cash  has. been  paid  out? 
How  much  cash  have  you  now  on  hand? 
Present  your  work,  with  your  answers  to  the  above  ques- 
tions, to  your  teacher  for  inspection. 


III. 

Things  that  are  bought  with  the  expectation  that  they  will 
be  consumed  ("used  up")  in  carrying  on  the  business,  are  classi- 
fied as  expense  and  charged  to  the  expense  account.  Also  all  out- 
lays for  labor,  rent,  etc.,  are  charged  to  this  account.  In  short 
the  Expense  account  shows  the  cost  of  carrying  on  the  business. 

You  may  now  take  a  half  sheet  of  ledger  paper  and  open  ac- 
counts as  follows :  at  the  top  of  the  first  page  (on  the  first  blue 
line,  equidistant  from  the  right  and  left  margins)  write  "Cash", 
at  the  top  of  the  second  page  write  "Merchandise",  and  at  the 
middle  of  the  second  page  write  "Expense".  Using  these  ac- 
counts, you  will  now  keep  track  of  the  values  in  the  following 
transactions,  which  are  taken  from  a  fuel  business : 

Jan.  10.  Cash  on  hand  $432.65.  Place  this  amount  with  the 
date  on  the  debit  side  of  your  Cash  account,  writing  in  the  wide 
column  the  words  "Balance  on  hand".  Thus  your  account  will 
show  the  amount  of  money  on  hand  at  the  time  of  beginning  these 
transactions. 

Rented  a  lot  at  the  corner  of  Twelfth  and  Ohio  Streets  to 
be  used  as  a  fuel  yard,  paying  one  month's  rent,  $22.50,  in  cash. 

Remember  in  every  transaction  to  ask  yourself  the  questions : 
What  account  costs  or  receives  value?  What  account  produces 
or  supplies  value? 

1 1 .  Paid  James  Sloan  for  work  in  cleaning  up  fuel  yard  $2 
in  cash. 

Bought  3  Ibs.  nails  for  use  in  repairing  yard  fence,  loc. 
Bought  lumber  for  use  in  repairing  fence  and  paid  for  same 
$2.50  in  cash. 

12.  Bought  one  carload  of  oak  wood  for  cash  $63. 
Bought  for  cash  20  tons  of  Black  Diamond  coal,  $120. 
Paid   J,  Swinton   for  cleaning  and  repairing  office   room, 

$4-25. 

Bought  office  books  and  stationery  for  cash,  $12.80. 
Bought  postage  stamps,  $5. 

13.  Sold  C.  W.  O'Connor,  for  cash,  i  cord  wood,  $9.75. 


Received  cash  for  I  ton  coal.  $9.50. 

14.  Bought  for  cash  I  carload  gum  wood,  $50. 

Sold  Smith  &  Dunton,  for  cash,  2  tons  Black  Diamond  coal, 
$19. 

Sold  25c  worth  of  stamps. 

Bought  for  cash  from  the  Southern  Mill  Co.,  5  loads  kind- 
ling at  $2  per  load. 

15.  Sold  for  cash,  I  ton  coal,  $9.50. 

Sold  for  cash  to  Walter  Stone,  I  cord  gum  wood,  $8,  and 
I  sack  kindling,  25C. 

Sold  postage  stamps  for  cash,  2oc. 

Received  cash  for  three  sacks  kindling,  75c. 

Paid  John  Dougan's  wages  for  week  in  cash,  $9.50. 

You  may  now  determine  the  answers  to  the  following  ques- 
tions : 

What  is  the  total  cost  of  merchandise? 

What  are  the  total  sales  of  merchandise? 

How  much  cash  was  received  during  the  week? 

How  much  cash  was  paid  out  during  the  week? 

How  much  cash  is  there  now  on  hand  ? 

How  much  has  been  paid  for  the  expenses  of  the  business? 

If  the  books  and  stationery  still  unused  are  worth  $12.00; 
3  weeks'  unused  rent,  $16.90;  unused  stamps,  $4.00;  what  has 
been  the  cost  of  running  the  business  for  the  week? 

Present  your  work  and  the  answers  to  the  above  questions 
to  your  teacher  for  inspection. 

IV. 

Under  our  definition  of  a  business  transaction,  page  I,  we 
find  that  values  are  sometimes  "promised  for  receipt"  or 
"promised  to  be  given".  Example :  John  Day  buys  a  wagon  of 
Walter  Boyle  for  $225,  agreeing  to  pay  for  the  same  in  thirty 
days.  In  this  transaction,  Mr.  Day  receives  a  wagon  and 
promises  to  give  $225 ;  while  Mr.  Boyle  gives  a  wagon  and  re- 
ceives a  promise  of  $225  to  be  paid  in  the  future.  Transactions 


of  this  kind,  where  promises  not  evidenced  by  writing  are 
given  or  received,  are  spoken  of  as  "sales  on  account"  or  "pur- 
chases on  account".  In  many  cases  these  promises  are  implied 
by  the  actions  of  the  parties  and  are  not  definitely  stated  in  words. 

We  open  accounts  with  persons,  firms  and  corporations  in 
order  to  keep  track  of  promises  given  and  received  which  are  not 
evidenced  by  writing.  These  accounts  are  Called  personal  ac- 
counts. Debit  personal  accounts  when  they  cost  the  business 
value,  and  credit  them  when  they  produce  or  supply  value  for 
the  business. 

Take  a  sheet  of  ledger  paper,  number  the  pages,  and  allowing 
one-half  page  for  each  account,  open  accounts  as  follows :  James 
D.  Norton,  Proprietor;  Cash,  Merchandise,  Expense,  Howard 
Hamilton,  Swinton  &  McLeod,  Mrs.  J.  W.  Upton,  Frank  C.  Sin- 
clair. 

Using  the  above  accounts,  keep  a  record  of  the  following 
transactions : 

Feb.  i.  James  D.  Norton  invests  $2000  cash  in  a  retail 
grocery  business.  Remember  you  are  keeping  the  records  for 
the  business.  Mr.  Norton  here  supplies  value  to  the  business  with 
the  implied  understanding  that  some  day  his  business  will  return 
this  amount  and  profits  in  addition  to  him.  Cash  is  received  by 
the  business. 

Remember  the  questions  that  you  are  to  ask  yourself  in 
every  transaction. 

Rented  store  at  2302  Central  Ave.,  paying  one  month's  rent, 
$35.00,  in  advance. 

2.  Bought  an  invoice  of  groceries  of  Craig,  Stone  &  Co.> 
for  cash,  $510.25. 

Bought  an  invoice  of  wrapping  paper  of  Howard  Hamilton. 
r;n  account,  $27.50. 

Paid  cash  for  cleaning  store,  $7.25. 

3.  Bought  of  Swinton  &  McLeod,  on  account,  a  bill  of 
groceries  amounting  to  $375. 

Bought  of  Howard  Hamilton,  on  account,  an  invoice  of 
paper  bags,  twine,  etc.,  $39. 


8 

The  proprietor  withdrew  from  the  store  for  private  use, 
groceries  amounting  to  $2.50. 

4.  Sold  Mrs.  J.  W.  Upton,  on  account,  groceries  amounting 

to  $6.13. 

Received  for  petty  cash  sales  during  the  day  $22.17. 

5.  Bought  of  Thurston  &  Clarke,  for  cash,  an  invoice  of 
groceries  amounting  to  $817.50. 

Bought  of  Swinton  &  McLeod  an  invoice  of  merchandise 
and  had  the  same  charged  to  our  account,  $47.60. 
Paid  Howard  Hamilton  on  account,  $50. 
Received  for  cash  sales  during  the  day  $26.10. 

6.  Sold  Frank  C.  Sinclair,  on  account,  groceries  amount- 
ing to  $8.94. 

Bought  of  the  Keystone  Produce  Co.,  for  cash,  an  invoice 
of  fruit  and  vegetables,  $13.70. 

Received  of  Mrs.  J.  W.  Upton,  cash  to  apply  on  account,  $5. 

Received  for  cash  sales  during  the  day  $49.72. 

Paid  Wm.  Wharton's  wages  for  the  week,  $8. 

You  have  learned  from  the  entries  which  you  have  been 
making  that  whenever  an  account  has  cost  value  some  other  ac- 
count has  produced  value  of  an  equal  amount.  Example :  When 
you  have  bought  merchandise  amounting  to  $50  for  cash,  mer- 
chandise has  cost  you  $50,  cash  has  produced  $50.  The  debit  of 
each  transaction  equals  the  credit  in  amount.  Since  this  is  true, 
the  sum  of  the  debits  of  your  ledger  must  equal  the  sum  of  the 
credits.  You  will  now  take  a  trial  balance  to  see  if  any  debits 
or  credits  have  been  omitted  from  the  ledger. 

Follow  these  instructions  step  by  step. 

1.  Sharpen  your  pencil  to  a  very  sharp  point. 

2.  Go  through  your  ledger  and  foot  the  accounts  in  pencil, 
placing  the  totals  in  position  like  the  small  figures  in  the  follow- 
ing account: 


~o 

*3&£o 


'A 


Do  not  rule  any  line  above  or  below  the  footings. 

3.  Take  a  half  sheet  of  Journal  paper;  on  the  first  blue  line 
at  the  top,  write  'Trial  Balance,  Feb.  6,  19.."  On  the  second 
blue  line,  write  the  page  and  name  of  the  first  account  and  in  the 
debit,  or  left-hand  money  column,  place  the  total  debit  and  in 
the  credit,  or  right-hand  money  column,  place  the  total  credit  of 
the  account.  The  following  is  correct : 


14 


e  2 


4.  On  the  next  blue  line,  list  the  next  account  of  your 
ledger,  and  continue  until  you  have  listed  all  accounts  in  the 
ledger,  leaving  out  such  accounts  as  balance  (total  debit  equals 
total  credit). 

5.  Foot  the  trial  balance  in  pencil  in  the  same  manner  as  you 
did  the  accounts  of  the  ledger.     If  the  debit  and  credit  columns 
are  equal,  you  may  rule  and  foot  the  trial  balance  in  ink.     Rule 
one  red  line  across  the  money  columns  above  the  footings  and 
two  lines  immediately  below.     Remember  that  rulings  should  be 
as  nearly  as  possible  upon  the  blue  lines  of  the  paper  and  never 
have  more  than  one  space  between  the  single  and  double  lines. 
Your  trial  balance  should  have  the  same  form  as  the  following 
except  the  color  of  the  ruling: 


10 


&£<? 


^  0 


You  should  now  be  able  to  answer  the  following  questions : 
What  is  meant  by  "buying  on  account"? 
What  is  meant  by  "selling  on  account"? 
What  are  personal  accounts? 
When  are  personal  accounts  debited?    Credited? 
What  is  the  object  of  taking  a  trial  balance? 
Apply  the  three  following  questions  to  each  of  the  accounts 
named  in  your  trial  balance : 

(a)  What  does  the  total  debit  show? 

(b)  What  does  the  total  credit  show? 

(c)  What  does  the  difference  between  the  total  debit  and 
credit  show? 

V. 

Using  the  same  ledger,  continue  the  business  of  James  D. 
Norton.  The  following  are  the  transactions  for  the  second  week 
of  February: 

Feb.  8.  Sold  Mrs.  J.  W.  Upton,  on  account,  groceries 
amounting  to  $2.43. 

Mr.  Norton  has  withdrawn  from  the  business  for  his  private 
use  $10  in  cash. 

Cash  sales  for  the  day  $33.49. 

9.     Paid  Swinton  &  McLeod,  on  account,  $47.60. 

Mr.  Norton  withdrew  from  business  for  private  use  mer- 
chandise amounting  to  $3.10. 

Paid  cash  for  advertising  in  the  Evening  Echo,  $13. 

Received  cash  of  Frank  C.  Sinclair  on  account,  $5. 


It 

Received  for  cash  sales  during  the  day  $42.25. 

10.  Sold    Frank   C,    Sinclair,   on     account,     merchandise 
amounting  to  $7.86, 

Bought  of  Preston  &  Little  an  invoice  of  fruit  and  vege- 
tables, paid  for  same  in  cash,  $10, 18. 
Cash  sales  for  day  $43.79. 

11.  Sold  Mrs.  J.  W»  Upton,  on  account,  groceries  amount- 
ing to  $3.29. 

Cash  sales  for  the  day  $39.75. 

12.  Paid  Howard  Hamilton  the  balance  we  owe  him  on 
account. 

Sold  Frank  C.  Sinclair,  on  account,  merchandise  amount- 
ing to  $8. 

Cash  sales  for  day  $42.80. 

13.  Mr.  Norton  withdrew  merchandise  for  his  private  use, 
$2.25. 

Sold  Mrs.  J.  W.  Upton,  on  account,  merchandise  amount- 
ing to  $4,15. 

Received  of  Mrs.  J.  W.  Upton,  to  apply  on  account,  $8  cash. 

Received  of  Frank  C.  Sinclair,  on  account,  $5* 

Cash  sales  for  the  day  $59.62. 

Paid  Wm.  Wharton's  wages  for  the  week,  $8. 

You  may  now  take  another  trial  balance  in  the  same  way 
as  the  one  of  February  6th,  include  the  pencil  footings  of  the 
6th  when  adding  up  the  accounts  in  the  ledger. 

Apply  each  of  the  three  following  questions  to  each  of  the 
accounts  shown  in  your  trial  balance: 

(a)  What  does  the  total  debit  show? 

(b)  What  does  the  total  credit  show? 

(c)  What  does  the  difference  between  the  total  debit  and 
the  total  credit  show? 

Carefully  preserve  your  work  for  this  set.  You  will  need 
it  later. 


VI. 


Thus  far  your  work  has  been  to  post  (enter)  the  debits  aiid 
the  credits  of  the  transactions  directly  to  the  ledger  accounts.  In 
this  manner  you  obtain  the  results  of  the  transactions  but  you  do 
not  have  as  complete  a  record  of  the  transactions  as  is  desirable 
in  business.  For  example,  it  is  not  sufficient  to  know  only  that 
you  have  debited  Mrs.  J.  W.  Upton,  on  Feb.  4,  $6.13.  It  is 
necessary  to  know  (especially  in  case  of  a  dispute)  why  you 
debited  her.  Generally  a  memorandum  of  the  transaction  is  writ- 
ten in  a  blotter  or  day-book  or  a  copy  of  the  sales  ticket  is  kept. 
According  to  the  following  illustration  and  instructions  you  will 
now  write  the  memoranda  of  the  transactions  for  February  on 
journal  paper  and  at  the  same  time  select  the  debits  and  credits 
and  arrange  them  in  the  journal  so  that  they  will  be  in  convenient 
form  for  posting  or  transferring  to  the  ledger.  Posting  to  the 
ledger  in  business  is  generally  done  at  odd  times  when  other 
matter's  do  not  require  ouf  attention.  The  fifst  thfee  transactions 
in  February  should  appear  in  the  joufnal  as  follows: 


--?>i^''»-z-ii^5-<f'^^li^ 


3  / 


Notice  and  remember  the  following  facts  concerning  the 
above  journal  entries : 

1.  The  name  of  the  account  to  be  debited  always  appears 
first. 

2.  Each  debit  of  credit  has  an  entire  line  by  itself. 

3.  The  debits  are  placed  to  the  left,  close  to  the  first  nar- 
row column,  and  the  amount  of  the  debit  in  the  left-hand  money 
column  on  the  same  horizontal  line. 

4.  The  credits  are  written  a  uniform  distance  to  the  right 
of  the  debits  and  the  amount  of  the  credit  is  placed  in  the  right- 
hand  money  column  on  the  same  horizontal  line  with  the  name 
of  the  credit. 

5.  The  explanation  is  written  under  the  journal  entry,  be- 
ginning a  uniform  distance  to  the  right  of  the  credit.     No  part 
of  the  explanation  is  outside  of  the  wide  Central  column. 

6.  A  blank  line  is  left  between  the  transactions,  at  the  cen- 
ter of  which  a  figure  indicating  the  date  of  the  following  trans- 
action is  placed. 

jf.  The  full  date  of  the  first  transaction  on  each  page  ap- 
jpears  at  the  top  of  the  page. 

Journalize  all  of  the  transactions  in  February  (beginning  on 
page  7)  and  present  your  work  to  your  teacher  for  inspection* 

VIL 

You  may  now  trace  the  debits  from  your  journal  to  the 
ledger  in  the  following  manner  i 


14 

1.  What  is  the  name  of  the  first  debit  in  the  journal? 
Turn  to  the  Cash  account  in  the  ledger. 

2.  What  is  the  amount  for  the  debit  of  Cash  in  the  journal? 
See  if  you  have  that  amount  on  the  debit  side  of  the  ledger  ac- 
count. 

3.  What  is  the  date  of  the  transaction  in  the  journal  ?    See 
if  you  have  entered  the  same  date  in  the  debit  side  of  the  ledger 
account. 

4.  What  page  of  the  journal  is  this  transaction  on?    Place 
the  figure  I  in  the  narrow  column  just  to  the  left  of  the  amount 
in  the  ledger  account  to  show  in  the  ledger  on  what  page  of 
the  journal  this  entry  occurs. 

5.  What  page  of  tke  ledger  is  this  account  on?     In  the 
journal,  in  the  narrow  column  to  the  left  of  the  word  Cash,  write 
the  figure  I  to  show  on  what  page  of  the  ledger  this  item  is 
posted. 

Continue  through  all  of  the  debits  in  the  same  manner.  Be 
sure  to  put  the  journal  page  in  the  ledger  and  the  ledger  page 
in  the  journal. 

Having  finished  the  debits,  proceed  in  similar  manner  with 
the  credits. 

Present  your  work  for  inspection. 

Carefully  preserve  your  work  for  this  set.  You  will  need 
it  later. 

VIII. 

Journalize  the  following  transactions : 

Feb.  15.  A.  J.  Laws  engaged  in  the  flour  and  feed  business 
at  142  Karl  St.  He  invested  $190x3  in  cash. 

(What  account  receives  value?  What  account  supplies 
value?) 

Paid  A.  S.  Lane  for  rent  of  store  to  Mar.  ist,  $50. 

Bought  of  Miller  &  Hale,  on  account,  an  invoice  of  flour 
amounting  to  $524. 

1 6.  Bought  of  A.  Stevens,  on  account,  an  invoice  of  hay, 
$264. 


15 

Paid  A.  C.  Randall  for  cleaning  store  room  $4.75. 
Bought  of  the  Gross  Stationery  Co.,  for  cash,  office  books, 
stationery,  etc.,  $28.60. 

17.  Sold  A.  C.  Mills,  on  account,  5  bbls.  flour,  $40. 
Bought  of  Patrick  &  Noble,  for  cash,  10,000  Ibs.  Ro.  barley, 

$600. 

Cash  sales  for  day  $18.75. 

1 8.  Bought  of  A.  Stevens,  on  account,  an  invoice  of  bran, 
$110, 

A.  J.  Laws  withdrew  from  business  for  private  use  $25  in 
cash. 

Cash  sales  $43.75. 

19.  Sold  Jno.  Harter,  on  account,  merchandise  amounting 
to  $64.25. 

Paid  Miller  &  Hale,  on  account,  $124. 

Sold  A.  C.  Mills,  on  account,  10  bbls.  flour,  $80. 

Cash  sales  $67.50. 

20.  Received  of  Jno.  Harter,  on  account,  $25. 
Paid  employes  for  services  during  week,  $13.50. 
Cash  sales  $88.60. 

22.  Sold  Sinclair  Walker,  on  account,  merchandise,  amount- 
ing to  $210. 

Received  of  John  Harter,  on  account,  $25. 
Cash  sales  $74. 

23.  Bought  of  A.  Stevens,  on  account,  invoice     of     mer- 
chandise amounting  to  $160. 

Sold  A.  C.  Mills,  on  account,  merchandise,  $56. 
Cash  sales  $91.10. 

24.  Mr.  Laws  withdrew  for  private  use  $5  cash. 
Paid  Miller  &  Hale,  on  account,  $200. 

Cash  sales  $76.40. 

25.  Received  of  Jno.  Harter  the  balance  due  on  his  ac- 
count. 

Cash   sales  $96.70. 

26.  Bought  of  A.  Stevens,  on  account,  invoice     of     mer- 
chandise, $104.60. 


i6 

Paid  for  extra  labor  today  $3.50. 
Cash  sales  $82.90. 

27.     Paid  Miller  &  Hale  the  balance  due  them  on  account. 
Received  of  A.  C.  Mills,  on  account,  $50. 
Cash  sales  $105. 
Paid  employees  salaries  $13.50. 

Paid  J.  C.  Swift  for  use  of  his  team  and  wagon  in  deliver- 
ing goods  during  the  past  two  weeks,  $18.75. 
Mr.  Laws  withdrew  cash  for  private  use,  $10. 
Present  your  journalizing  for  inspection. 

IX. 

Take  iy2  sheets  of  ledger  paper  and  number  the  pages.  Al- 
low one  page  for  Cash  and  one  for  Merchandise  accounts  and 
one-half  page  for  each  of  the  other  accounts.  Open  accounts  in 
the  following  order:  A.  J.  Laws,  Proprietor;  Expense,  Cash 
Merchandise,  Miller  &  Hale,  A.  Stevens,  A.  C.  Mills,  Jno.  Har- 
ier,  Sinclair  Walker. 

Post  the  transactions  from  the  journal  to  the  ledger  in  the 
following  manner: 

1.  What  is  the  name  of  the  first  debit  in  the  journal?  Turn 
to  the  Cash  account  in  the  ledger. 

2.  What  is  the  amount  of  the  first  debit  in  the  journal? 
Place  this  amount  on  the  debit  side  of  the  Cash  account  in  the 
ledger. 

3.  What  is  the  date  of  the  first  transaction  in  the  journal? 
Enter  this  date  in  the  proper  columns  on  the  debit  of  the  Cash 
account  in  the  ledger. 

4.  What  page  of  the  journal  is  this  transaction  on?    Place 
this  page  in  the  proper  column  on  the  debit  side  of  the  Cash  ac- 
count in  the  ledger. 

5.  What  page  of  the  ledger  is  this  account  on?    Place  the 
number  of  this  page  in  the  proper  place  in  the  journal. 

Proceed  with  each  of  the  debits  in  similar  manner.  When 
the  debits  are  finished,  begin  with  the  first  of  the  credits  and 
post  them  according  to  the  same  routine. 


17 

Check  your  posting  by  going  over  all  of  the  transactions  in 
the  journal  and  tracing  them  to  the  ledger  to  see  if  you  have 
made  any  error  or  omission.  When  you  discover  an  item  to  be 
correctly  posted,  place  a  very  small  pencil  check  mark  to  the  left 
of  the  amount  in  both  the  journal  and  ledger. 

Take  a  trial  balance. 

You  should  be  able  to  answer  the  following  questions : 

What  is  journalizing? 

WThat  is  the  routine  for  posting? 

When  is  posting  usually  done? 

Apply  each  of  the  three  following  questions  to  eacn  of  the 
accounts  in  your  ledger: 

(a)  What  does  the  total  debit  show? 

(b)  What  does  the  total  credit  show? 

(c)  What  does  the  difference  between  the  total  debit  and 
total  credit  show? 

Present  all  of  your  work  for  inspection.  Carefully  preserve 
your  work  for  this  set.  You  will  need  it  later. 

X. 

Journalize  the  following  transactions;  be  sure  to  make  your 
\vork  accurate  and  complete  in  all  details;  remember  to  ask 
yourself  concerning  each  transaction  "What  account  receives  or 
costs  value?"  and  "What  account  produces  or  supplies  value?" 

March  i.  J.  Oscar  Dwight  engages  in  the  Flour  and  Grain 
business,  at  516  Towne  St.,  investing  $2500  in  cash. 

Paid  Henry  Le  Sage  one  month's  rent  in  advance,  as  per 
previous  agreement,  $65. 

Bought  for  cash,  2000  bu.  oats  at  3oc  per  bu. 

Bought  of  the  W.  Thyne  Co.,  for  cash,  stationery,  books, 
etc.,  for  use  in  the  business,  $18.65. 

2.  Bought  of  C.  S.  Huff  &  Co.,  on  account,  300  bbls.  flour 
at  $4.07  per  bbl.,  500  bu.  oats  at  31  cts.  per  bu. 

Bought  of  R.  Miller,  on  account,  500  bu.  rye  at  50  cts. 

3.  Sold  A.  Williams  &  Co.,  on  account,  450  bu.  oats  at  39 
cts.,  100  bu.  rye  at  60  cts. 


5.  Paid  C.  S.  Huff  &  Co.,  on  account,  $600. 

6.  Bought  of  King  &  Hicks,  on  account,  1500  bu.  corn  at 
35  cts. 

7.  Paid  freight  on  the  corn  bought  of  King  &  Hicks,  $12.45, 
Note:    Freight  and  drayage  paid  on  merchandise  which  has 

been  purchased,  is  usually  considered  as  a  part  of  the  cost  of  the 
merchandise  and  therefore  charged  direct  to  the  merchandise  ac- 
count. 

Sold  D.  O.  Sage  &  Co*,  on  account,  500  bu.  corn  at  41  els., 
60  bbls.-  flour  at  $4.55. 

8.  Sold  K.  E.  Fitch  &  Co.,  on  account,  250  bu.  corn  at  42 
cts.,  425  bu.  oats  at  37  cts. 

9.  Mr.  Dwight  (proprietor)  has  withdrawn  from  the  busi- 
ness, for  his  private  use,  $30  cash. 

10.  Bought  of  King  &  Hicks,  on  account,  950  bu.  corn  at 
35  cts.  per  bu.,  325  bu.  rye  at  53  cts. 

Paid  C.  S.  Huff  &  Co.,  to  apply  on  account,  $150. 

12.  Sold  to  A.  R.  Land,  on  his  note  at  10  days,  56  bbls.  flour 
at  $4-63. 

The  note  referred  to  in  this  transaction  is  a  written  instru- 
ment, signed  by  Mr.  Land,  in  which  he  promises  to  pay  $259.28 
in  ten  days*  The  following  illustration  shows  the  form  of  the 
note: 


In  business,  written  obligations  to  pay  money  at  a  future 
time  are  a  higher  form  of  value  than  oral  promises.  It  is  better 
tc  have  a  man*s  written  promise  than  his  spoken  one.  For  this 
reason  the  bookkeeper  must  classify  written  obligations  in  such 


19 

manner  as  to  keep  them  separate  from  oral  promises,  which  are 
entered  in  personal  accounts.  Written  obligations,  payable  in 
money  at  a  future  time,  when  in  favor  of  our  business  (that  is, 
promising  payment  to  us)  are  classified  as  Bills  Receivable. 
When  the  obligations  are  made  by  our  business  (we  promising 
to  make  the  payment  to  others)  they  are  classified  as  Bills  Pay- 
able. The  same  questions  and  rules  that  you  have  been  using  in 
all  of  your  transactions  apply  to  Bills  Receivable  and  Bills  Pay- 
able. In  the  above  sale  to  Mr.  Land,  what  account  receives  or 
costs  value?  What  account  produces  or  supplies  value? 

13.  Sold  A.  Williams  &  Co.,  on  their  note  at  15  days,  125 
bbls.  flour  at  $4.61. 

14.  D.  O.  Sage  &  Co.,  who  owe  us  $478  for  invoice  of  the 
seventh,  asks  us  to  accept  their  note  at  30  days  in  payment  of  the 
account.     Mr.  Dwight  has  agreed  to  do  this. 

Note:  We  now  have  their  written  promise  or  note  instead 
of  their  oral  promise  as  shown  by  their  account.  Think  out 
carefully  how  this  affects  Bills  Receivable  and  D.  O.  Sage  &  Co.'s 
accounts. 

15.  K.  E.  Fitch  &  Co.  send  us  their  note  of  $100,  due  in 
10  days,  to  apply  on  account. 

1 6.  Bought  of  C.  S.  Huff  &  Co.,  150  bbls.  flour  at  $4.02, 
480  bu.  corn  at  36  cts.,  on  account. 

17.  Sold  Fulton  Judd,  420  bu.  oats  at  37  cts.,  250  bu.  corn 
at  41  cts.,  on  his  note  at  two  months. 

19.  Bought  of  King  &  Hicks,  on  our  note  at  5  days,  250 
bbls.  flour  at  $4.01,  450  bu.  corn  at  34  cts. 

Note:  We  are  here  issuing  our  written  promise  to  pay. 
How  is  this  promise  classified?  Carefully  apply  your  questions. 

20.  Bought  of  Fallis  &  Ware,  on  our  note  at  5  days,  500  bu. 
corn  at  36  cts. 

21.  Sold  W.  A.  Glass,  75  bbls.  flour  at  $4.65,  250  bu.  corn 
at  39  cts.,  received  in  payment  his  note  at  60  days. 

22.  Sold  Jas.  D.  Southfield,  50  bbls.  flour  at  $4.66,  410  bu. 
corn  at  39  cts.,  on  account. 


20 

23.  Bought  of  Willis  A.  Hicks,  500  bu.  oats  at  34  cts.,  800 
bu.  corn  at  34  cts.,  gave  in  payment  our  note  at  45  days. 

Sold  D.  Rose  and  Bro.,  on  account,  65  bbls.  flour  at  $4.62. 

Received  of  A.  R.  Land,  in  full  for  his  note  of  the  I2th  inst., 
$259.28  cash. 

Note:  You  are  now  receiving  cash  for  a  written  promise. 
Your  answer  to  the  question,  "what  account  produces  or  supplies 
value?"  must  necessarily  be  Bills  Receivable  as  it  is  the  written 
promise  of  another  in  favor  of  our  business  which  is  being  paid. 

24.  Received  of  K.  E.  Fitch  &  Co.,  in  payment  of  their 
note,  due  tomorrow,  $100. 

Paid  our  note  of  the  iQth  inst.  in  favor  of  King  &  Hicks. 
Note :     What  kind  of  an  obligation  are  we  paying  ?     How 
is  it  classified? 

Paid  our  note  in  favor  of  Fallis  &  Ware,  dated  March  2Oth. 

26.  Received  of  K.  E.  Fitch  &  Co.,  to  apply  on  account, 
their  note  at  60  days  for  $150. 

Mr.  Dwight  has  transferred  W.  A.  Glass'  note  of  the  2ist 
inst.,  for  $446.25,  to  C.  S.  Huff  &  Co.,  to  apply  on  account. 

Note:  Instead  of  holding  this  Bills  Receivable  until  it  is 
due,  collecting  it,  and  then  paying  our  account  in  favor  of  Huff 
&  Co.,  they  have  consented  to  take  the  note  at  its  face  value  as 
part  payment  of  the  account.  Apply  your  questions  carefully. 

27.  Received  of  A.  Williams  &  Co.,  in  payment  of  their 
note  of  the  I3th  inst.,  $576.25. 

Gave  King  &  Hicks,  to  apply  on  account,  our  note  of  $300, 
due  in  10  days. 

Paid  freight  and  drayage  bills  to  date,  $28.50. 

28.  Mr.  Dwight  has  taken  from  the  store,  for  his  own  use, 
I  bbl.  flour  at  $4.01. 

29.  Bought  of  Henry  Le  Sage  the  store  and  lot  we  are  now 
occupying.     Gave  in  payment  $500  cash  and  a  note,  due  in  2 
years,  for  $4500. 

It  is  customary  to  carry  investments  in  land  and  buildings 
in  real  estate  accounts.  In  order  to  determine  the  income,  ex- 
pense, gain  or  loss,  on  each  separate  piece  of  real  estate,  it  is 


21 

necessary  to  have  a  separate  account  with  each  separate  piece, 
so  to  distinguish  this  property  from  other  property  that  might 
be  bought  later,  we  will  open  this  account  as  "Real  Estate,  516 
Towne  St."  The  rules  used  for  debiting  or  crediting  real  prop- 
erty accounts  are  the  same  as  used  for  other  accounts.  Two 
things  are  given  in  this  transaction  (cash  and  note)  to  secure 
one  thing  (real  estate),  so  our  entry  must  show  one  debit  and 
two  credits  and  will  appear  in  the  journal  in  the  following  form : 

Real  Estate,  516  Towne  St.  5000 

Cash  500 

Bills  Payable  4500 

Entries  having  more  than  one  debit  or  more  than  one  credit 
are  of  frequent  occurrence.  Why  is  real  estate  debited?  Why 
are  cash  and  bills  payable  credited? 

30.  Received  of  A.  Williams  &  Co.,  cash  in  full  of  account. 

31.  Paid  clerk  hire,  $28. 

Present  your  journalizing  for  inspection. 

XL 

Take  two  sheets  of  ledger  paper  and  number  the  pages. 
Open  accounts  in  the  following  order,  allowing  y2  page  for  each 
account :  J.  Oscar  D wight.  Proprietor,  Cash,  Merchandise,  Ex- 
pense, Bills  Receivable,  Bills  Payable,  C.  S.  Huff  &  Co.,  R.  Mil- 
ler, King  &  Hicks,  A.  Williams  &  Co.,  D.  O.  Sage  &  Co.,  K.  E. 
Fitch  &  Co.,  Jas.  D.  Southfield,  D.  Rose  &  Bro.,  Real  Estate, 
516  Towne  St. 

Post  the  items  from  your  journal. 

Check  your  posting. 

Foot  your  ledger  accounts  in  small  pencil  figures. 

Take  a  trial  balance.  Instead  of  putting  the  total  debit  and 
the  total  credit  of  each  account  both  in  the  trial  balance  as  here- 
tofore, take  the  difference  between  the  debit  and  credit  of  each 
account  and  place  only  this  difference  in  the  trial  balance.  To 
illustrate :  Suppose  the  total  debit  of  the  cash  account  is  $526.73 
and  the  total  credit  $313.52,  the  difference  then  is  $213.21,  which 


22 

amount  place  in  the  debit  column  of  the  trial  balance  opposite 
the  name  of  the  account.  Be  careful  to  place  the  difference  of 
each  account  of  the  debit  side  of  the  trial  balance  if  the  debit 
footing  is  the  larger,  on  the  credit  side  of  the  trial  balance  if  the 
credit  footing  is  the  larger. 

You  should  now  be  able  to  answer  the  following  questions 
concerning  each  of  the  accounts  in  your  ledger : 

(a)  What  does  the  total  debit  show? 

(b)  What  does  the  total  credit  show? 

(c)  What  does  the  difference  between  the  total  debit  and 
the  total  credit  show? 

Present  your  work  for  inspection. 


XII. 


You  will  now  make  a  statement  showing  the  resources  and 
liabilities  of  the  business.  Anything  of  value  which  the  business 
owns,  controls  and  can  dispose  of,  is  a  resource.  Anything  that 
the  business  owes  or  is  liable  for,  is  a  liability.  Follow  instruc- 
tions carefully,  step  by  step.  Take  ^2  sheet  of  journal  paper, 
write  across  the  top  "Resources  and  Liabilities,  Mar. 
31,  19..",  and  at  the  top  of  the  left-hand  money  column 
"Resources"  and  the  right-hand  column  "Liabilities".  You  have 
been  applying  to  the  ledger  accounts  the  questions :  (a)  What 
does  the  total  debit  show?  (b)  What  does  the  total  credit  show? 
(c)  What  does  the  difference  between  the  total  debit  and  credit 
show?  Now  add  one  more  question,  (d)  Is  the  difference  a  re- 
source or  a  liability? 

Begin  with  the  Cash  account;  write  the  page  and  name  of 
the  account  on  your  statement  the  same  as  for  a  trial  balance; 
determine  by  the  above  questions  whether  it  shows  a  resource  or 
a  liability  and  place  the  amount  in  the  proper  column.  (See  il- 
lustrative statement  page  26.) 


23 

Mr.  D  wight  reports  the  property  on  hand  at  the  close  of 
business  March  31  to  be  as  follows: 

1705  bu.  oats  .33        $562.65 

725  bu.  rye  .50          362.50 

3020  bu.  corn  ,35         1057.00 

208  bbls.  flour  4,02          836.16      $2818.3! 

Real  Estate,  516  Towne  St.  5000.00 

A  list  of  property  on  hand,  like  the  above,  is  called  an  in- 
ventory. 

In  the  Merchandise  account,  the  debit  shows  the  total  pur- 
chases, the  credit  the  total  sales,  and  the  difference  the  excess  of 
purchases  over  sales ;  but  as  merchandise  is  not  sold  at  the  same 
price  for  which  it  is  bought,  the  worth  of  the  stock  on  hand  is 
not  the  same  as  the  balance  of  the  account.  To  get  the  worth 
of  the  merchandise  on  hand  refer  to  the  inventory  above.  De- 
termine whether  this  inventory  shows  a  resource  or  a  liability  and 
enter  it  accordingly  on  your  statement. 

The  next  account  in  your  ledger,  Expense,  shows  the  cost  of 
things  used  up  in  carrying  on  the  business.  As  these  things  have 
been  used  up,  they  can  not  now  be  a  resource,  and  as  they  were 
paid  for  during  the  month,  they  can  not  be  a  liability.  Leave  the 
account  out  of  the  statement  as  it  shows  neither  a  resource  or  a 
liability. 

Bills  Receivable  is  the  next  account  in  your  ledger.  Apply 
the  questions  (a,  b,  c,  d,)  and  place  the  account  on  your  state- 
ment in  accordance  with  your  answers. 

Continue  through  your  ledger  applying  the  questions  (a,  b, 
c,  d,)  to  each  of  the  remaining  accounts.  If  the  accounts  show 
resources  or  liabilities,  place  them  on  your  statement,  otherwise 
leave  them  out. 

Foot  in  pencil  the  resource  and  liability  columns  of  your 
statement.  It  is  evident  that  the  footing  of  the  resource  column 
shows  all  of  the  value  owned  or  controlled  by  the  business,  while 
the  footing  of  the  liability  column  shows  all  that  is  owed  by  the 
business.  The  difference  between  the  resources  and  liabilities  is 
\vhatthebusinessisworth,  or  it  is  the  proprietor's  interest  in  the 


24 

business  and  is  called  his  present  worth.  Write  on  the  first  blank 
line  of  your  statement,  in  red  ink,  "J.  Oscar  Dwight's  Present 
Worth"  and  place  the  amount  in  the  liability  column.  Rule  and 
foot  the  statement  in  the  same  manner  as  a  trial  balance. 

You  will  now  make  a  statement  of  losses  and  gains.  Ac- 
counts which  have  cost  the  business  value  and  have  not  produced 
as  much  as  they  have  cost,  and  will  not  in  the  future  produce  any 
more  on  this  cost,  show  loss.  Accounts  which  have  produced 
more  than  they  have  cost,  and  will  not  in  the  future  cost  more 
on  what  they  have  already  produced,  show  gain. 

On  y>  sheet  of  journal  paper  write  the  heading 
"Losses  and  Gains,  Mar.  31,  19..",  and  at  the  top  of  the  left- 
hand  money  column  "Losses",  -and  the  right-hand  column 
"Gains".  Those  accounts  in  your  ledger  of  which  the  entire  dif- 
ference shows  either  a  resource  or  a  liability  can  not,  of  course, 
show  loss  or  gain.  This  leaves  for  the  statement  of  losses  and 
gains  only  such  accounts  as  are  not  entirely  used  in  the  state- 
ment of  resources  and  liabilities. 

The  debit  of  the  merchandise  account  shows  total  purchases 
or  cost.  The  credit  side  of  the  account  shows  total  sales.  The 
sales  added  to  the  inventory  (goods  on  hand)  shows  what  all  of 
the  merchandise  has  been  worth  to  the  business,  this  sum  com- 
pared with  the  cost  will  show  the  gain  or  loss  on  the  merchan- 
dise. Find  the  gain  in  the  merchandise  account  on  your  state- 
ment in  this  same  form  as  shown  in  the  illustrative  statement. 

Add  to  your  ledger  question  "d"  the  words  "loss  or  gain", 
and  then  apply  all  of  the  questions  (a,  b,  c,  d)  to  the  Expense 
account  and  enter  it  properly  on  your  statement. 

Since  all  of  the  rest  of  the  accounts,  excepting  the  proprie- 
tor's, show  nothing  but  resources  and  liabilities,  you  will  now 
find  the  difference  between  the  losses  and  gains.  This  difference 
is  the  net  gain  for  the  month,  enter  it  on  your  statement  in  the 
same  manner  as  shown  on  the  illustrative  statement. 

Mr.  D  wight  invested  $2500  and  withdrew  $34.01,  which 
leaves  his  net  credit  $2465.99.  Add  to  his  net  credit,  $2465.99, 
the  net  gain  for  the  month,  $69.30,  and  the  sum  is  his  present 


25 

worth,  $2535.29.  This  present  worth  must  agree  with  the  pres- 
ent worth"  as  shown  on  the  statement  of  resources  and  liabilities. 
(See  illustrative  statement.) 

You  should  now  be  able  to  answer  the  following  questions : 

What  is  a  resource?    Liability? 

In  what  two  ways  can  the  proprietor's  present  worth  be 
found  ? 

What  is  an  inventory  ? 

Present  your  statements  for  inspection. 


26 


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XIII. 

You  will  now  close  the  accounts  which  show  either  loss  or 
gain.  Begin  with  merchandise.  The  debit  side  shows  all  the 
merchandise  bought.  The  credit  side  shows  all  of  the  merchan- 
dise sold.  To  close  the  account,  the  inventory  is  added  to  the 
credit  side,  thus  showing  the  entire  worth  of  merchandise  to  the 
business.  Write  on  the  first  blank  line  of  the  credit  side  in  red 
ink,  "Mar.  31,  Inventory  2818.31".  (See  illustration  page  30.) 
Since  the  total  debit  is  now  smaller  than  the  credit  of  the  account, 
it  shows  a  gain  equal  to  the  difference  (as  merchandise  has  been 
worth  more  to  the  business  than  it  cost).  Write  on  the  first 
blank  line  of  the  debit  side,  in  red  ink,  "Mar.  31,  Gain  180.95". 
(See  illustrative  closing.)  Now  rule  and  foot  the  account.  RE- 
MEMBER the  ruling  is  in  red  and  always  on  the  same  horizon- 
tal blue  line,  the  single  lines  extend  only  across  the  money 
columns  above  the  footings,  the  double  lines  extend  across  all 
except  the  explanation  columns  and  are  on  the  first  blue  line 
below  the  footings  and  the  single  line,  the  footings  are  in  black 
ink.  (See  illustrative  closing.) 

A  double  entry  ledger  should  always  be  in  balance  (total 
debits  equal  to  the  total  credits).  You  added  the  inventory  to 
the  credit  without  putting  a  like  amount  on  the  debit.  By 
transferring  the  inventory  to  the  debit  side  of  the  account,  you 
will  off-set  its  addition  to  the  credit  and  at  the  same  time  show 
the  amount  of  merchandise  on  hand  at  the  beginning  of  the  next 
day's  business.  Write  on  the  first  blank  line  below  the  closing, 
in  black  ink,  on  the  debit  side,  "Apr.  I,  Inventory  2818.31". 
REMEMBER  all  red  ink  entries  made  in  your  ledger,  must  be 
transferred  to  the  opposite  side  of  the  account  in  which  made, 
or  to  the  opposite  side  of  some  other  account,  before  the  closing 
of  the  account  is  complete  and  the  ledger  restored  to  a  balance. 

One  of  the  objects  in  closing  the  ledger  is  to  gather  the 
losses  and  gains  together.  To  do  this,  open  a  Loss  and  Gain 
account  at  some  convenient  place  in  your  ledger.  You  have 
entered  the  gain  on  merchandise  in  the  merchandise  account  on 


29 

the  debit  side  in  red  ink.  Now  transfer  that  amount  to  the 
credit  side  of  the  Loss  and  Gain  account.  Write  on  the  credit 
side  of  the  Loss  and  Gain  account,  in  black  ink,  "Mar.  31,  Mer- 
chandise 180.95".  You  write  the  word  "merchandise"  in  the 
loss  and  gain  account  to  show  in  what  account  the  gain  occurred, 
also  place  in  the  folio  column  the  page  of  the  ledger  on  which  the 
merchandise  account  is  found.  Turn  to  your  Merchandise  ac- 
count, and  place  the  page  of  the  Loss  and  Gain  account  in  the 
folio  column  after  the  word  "Gain"  to  show  where  the  amount 
was  transferred  to.  (See  illustrative  closing.) 

You  will  now  close  the  Expense  account.  Does  this  ac- 
count show  a  gain  or  loss  ?  Why  ?  Write  on  the  credit  side,  in  red 
ink,  "Mar.  31,  Loss  111.65".  ^u^e  an<^  foot  the  account  in  the 
same  manner  as  the  merchandise  account  has  been  ruled  and 
footed.  Be  sure  to  get  your  ruling  on  the  same  horizontal,  blue 
lines.  Now  transfer  the  loss  to  the  Loss  and  Gain  account. 
Write  on  the  debit  side  of  the  Loss  and  Gain  account,  in  black 
ink,  "Mar.  31,  Expense  111.65",  and  put  in  the  page  of  the  Ex- 
pense account,  also  put  the  page  of  the  Loss  and  Gain  account  in 
the  Expense  account.  (See  illustrative  closing.)  Why  is  the 
word  "Expense"  written  in  the  Loss  and  Gain  account? 

If  you  refer  to  your  statement  of  losses  and  gains,  you  will 
see  that  you  have  closed  all  of  the  accounts  which  show  either 
loss  or  gain  into  the  loss  and  gain  account.  Now  it  is  necessary 
to  close  the  loss  and  gain  account,  so  as  to  give  the  gain  to  the 
proprietor,  to  whom  it  belongs.  Write  on  the  debit  side  of  the 
loss  and  gain  account,  in  red  ink,  "Mar.  31,  J.  Oscar  Dwlght 
69.30".  Rule  and  foot  the  account.  Place  in  the  folio  column 
the  page  of  the  J.  Oscar  Dwight  account,  so  as  to  show  where 
the  net  gain  has  been  carried.  Write  on  the  credit  side  of  J. 
Oscar  Dwight's  account,  in  black  ink,  "Mar.  31,  Net  Gain  69.30", 
and  the  page  of  the  Loss  and  Gain  account.  \Vrite  on  the  debit 
side  of  Dwight's  account,  in  red  ink,  "Mar.  31,  Present  Worth 
2535.29".  Rule  and  foot  the  account.  Bring  the  Present 
Worth  down  on  the  credit  side.  Why?  Write,  in  black  ink, 
"Apr.  i,  Present  worth  2535.29".  (See  illustrative  closing;. 


30 

You  will  also  close  the  Cash  account.  On  the  credit  side,  in 
red  ink,  write  "Mar.  31,  Balance  302.93",  (See  illustrative  clos- 
ing.) Rule  and  foot.  Bring  the  balance  down  on  the  debit  side, 
in  black  ink,  as  follows:  "Apr.  i,  Balance  302.93".  This  ac- 
count is  closed  to  show  how  much  cash  we  have  on  hand  at  the 
end  of  the  month. 

You  should  now  be  able  to  answer  the  following  questions : 

What  color  is  used  for  closing  entries? 

What  color  is  used  for  the  transferred  entries? 

What  accounts  have  been  closed? 

What  does  the  difference  between  the  two  sides  of  the  Loss 
and  Gain  account  show? 

Where  is  the  net  gain  carried?    Why? 

How  is  the  proprietor's  account  closed? 

Where  should  the  inventory  of  merchandise  appear  after 
the  ledger  is  closed? 

Present  your  work  for  inspection. 


3' 
XIV. 

You  will  now  make  the  statements  and  close  the  ledger  for 
the  business  of  which  James  D.  Norton  is  the  proprietor,  Feb. 
i  to  13.  Use  the  ledger  that  you  have  already  prepared  for  this 
set.  The  inventory  of  merchandise  on  hand,  Feb.  13,  is  $1610.40. 

Read  over  carefully  the  instructions  for  the  statements  and 
closing  which  you  have  just  finished,  if  you  have  any  difficulty. 
They  will  apply  equally  well  to  this  work  although  the  amounts 
are  different.  Use  the  following  order  in  your  work :  Statement 
of  Resources  and  Liabilities,  Statement  of  Losses  and  Gains, 
Ledger  Closing.  Present  your  work  for  inspection. 

XV. 

You  will  now  make  the  statements  and  close  the  ledger  for 
the  business  of  which  A.  J.  Laws  is  the  proprietor,  Feb.  15  to  27. 
Use  the  ledger  which  you  have  already  prepared  for  this  busi- 
ness. The  inventory  of  merchandise  on  hand,  Feb.  27,  is  $905.80. 
Follow  the  same  order  as  indicated  for  the  Norton  set. 

INTEREST  AND  DISCOUNT. 

The  owner  of  money  frequently  allows  others  to  use  his 
money  for  a  period  of  time  receiving  in  return  a  certain  com- 
pensation for  its  use.  If  the  compensation  for  the  use  of  the 
money  is  paid  at  the  time  the  money  is  returned  to  the  owner  or 
the  lender,  it  is  usually  spoken  of  as  interest.  If  the  compensa- 
tion for  the  use  of  the  money  is  deducted  at  a  time  before  the 
money  is  returned  to  the  owner  or  lender,  it  is  generally  spoken 
of  as  discount.  The  amount  of  compensation  allowed  for  the 
use  of  money  is  generally  estimated  at  a  certain  per  cent,  per 
annum.  Thus  if  A  loans  B  some  money  with  the  understanding 
that  B  will  pay  interest  at  6%,  it  means  that  B  will  give  A  6-100 
of  the  sum  borrowed  for  the  use  of  that  sum  for  one  year.  If 


he  retains  the  sum  for  a  longer  or  shorter  period  than  one  year, 
he  will  pay  a  proportionate  amount  for  its  use. 
What  is  the  interest  at  6%  on : 

1.  $54  for  i  year? 

2.  $110  for  i  year? 

3.  $54  for  il/2  years? 

4.  $54  for  y2  year? 

5.  $110  for  l/4  year? 

The  year  is  commonly  considered  as  360  days  for  business 
purposes.  60  days  is  what  part  of  a  year?  What  is  1-6  of  6-100? 

If  6-100  of  the  sum  loaned  is  the  interest  for  one  year  (360 
days),  the  interest  for  60  days  is  what  part  of  the  sum  loaned? 

How  do  you  find  i-ioo  of  any  sum?  The  interest  at  6%  for 
60  days  is  what  part  of  the  sum  loaned?  How  can  you  find  the 
interest  on  any  sum  of  money  for  60  days  at  6%  ? 

What  is  the  interest  at  6%  on: 

6.  $54  for  60  days?     120  days?    30  days?     12  days?     10 
days? 

7.  $110  for  60  days?     180  days?    20  days?     12  days?  15 
days? 

8.  $5267.50  for  60  days?     120  days?     10  days?     15  days? 
12  days? 

6  is  what  part  of  360?  What  is  1-60  of  6-100?  If  6-100  of 
the  sum  loaned  is  the  interest  for  one  year,  the  interest  for  6 
days  is  what  part  of  the  sum  loaned?  How  many  places  are 
pointed  off  to  find  the  interest  for  6  days? 

In  the  above  problems,  you  found  the  interest  for  60  days 
by  pointing  off  two  places.  To  find  the  interest  for  the  required 
number  of  days,  you  multiplied  or  divided.  The  number  of 
days  in  each  case  being  a  multiple  or  aliquot  part  of  60,  the  opera- 
tion was  very  simple.  The  operation  in  finding  the  interest  for 
any  number  of  days  may  be  made  equally  simple  by  dividing  the 
time  up  into  aliquot  parts  or  multiples  of  6  or  60. 


33 

Example:    Find  the  interest  on  $235  for  44  days  at  6%. 
44  days=7x6  days  plus  2  days* 
»235=interest  for  6  days, 
7 

l.645=interest  for  42  days  (7x6  days). 
.O78=interest  for  2  days  (1-3  of  6  days). 

i  .723=interest  for  44  days  (42  days  plus  2  days). 
Divide  the  following  periods  of  time  into     multiples     or 
aliquot  parts  of  6  or  60 : 

9.     13  days,  23  days,  16  days,  43  days,  57  days. 
16.     7  days,  14  days,  27  days,  49  days,  93  days. 

11.  68  days,  55  days,  23  days,  17  days,  108  days. 
Find  the  interest  at  6%  on : 

12.  $272.50  for  13  days,  23  days,  16  days,  43  days,  57  days. 

13.  $316  for  7  days,  14  days,  49  days,  27  days,  93  days. 

14.  $2408.36  for  68  days,  55  days,  23  days,  17  days,  108 
days. 

When  negotiable  paper  reads  a  certain  number  of  years  or 
months,  the  time  is  computed  by  calendar  years  or  months.  Ex- 
ample: A  note  dated  Jan.  12,  at  three  months,  is  due  April  12. 
When  negotiable  paper  reads  a  certain  number  of  days,  the 
exact  number  of  days  are  counted. 

Find  the  date  when  the  note  is  dtie,  arid  the  time  in  days 
for  the  payment  of  interest,  on  the  following: 

15.  Note  dated  Jan.  3,  at  3  moS.,  paid  Mar.  20. 

1 6.  Note  dated  July  16,  on  demand,  paid  Sept.  4. 

17.  Note  dated  May  7,  at  60  days,  paid  July  10. 

1 8.  Note  dated  Feb.  6,  1907,  at  I  year,  paid  Feb  6,  1908. 

19.  Note  dated  Aug.  20,  at  90  days,  paid  Dec.  4. 
26.     Note  dated  Feb.  28,  at  6  mos.,  paid  June  26. 

21.  Note  dated  Oct.  I,  at  60  days,  paid  Jan.  3. 

22.  Note  dated  Dec.  12,  at  90  days,  paid  Mar.  1. 

23.  Note  dated  Sept.  10,  at  3  mos.,  paid  Dec.  io. 

24.  Note  dated  Mar.  4,  at  to  days,  paid  Mar.  31. 

25.  Note  dated  Nov.  24,  at  6  mos.,  paid  Apr.  2. 


34 

26.  Note  dated  May  30,  at  30  days,  paid  June  29. 

27.  Note  dated  Aug.  20,  at  I  mo.,  paid  Sept.  30. 

28.  Note  dated  Jan.  13,  at-  60  days,  paid  Mar.  6. 

29.  Note  dated  Feb.  I,  at  90  days,  paid  May  10. 
Find  the  interest  on: 

30.  A  note  for  $500,  dated  Jan.  3,  at  3  mos.,  paid  Mar.  20, 
at  6%. 

31.  A  note  for  $315.50,  dated  July  16,  on  demand,  paid 
Sept.  4,  at  6%. 

32.  A  note  for  $425,  dated  May  7,  at  60  days,  paid  July 
10,  at  7%.     (Add  1-6  of  interest  at  6%.    Why?) 

33.  A  note  of  $150,  dated  Feb.  6,   1907,  at  I  year,  paid 
Feb.  6,   1908,  at  5%.     (How  do  you  find  the  interest  at  5% 
after  you  have  found  it  at  6%  ?  Why?) 

34.  A  note  for  $2500,  dated  Aug.  20,  at  90  days,  paid  Dec. 
4,  at  4^%. 

Los  Angeles,  Cal.,  Mar.  3,  1907. 

Three  months  after  date  I  promise  to  pay  to 

Silas  Warner,  or  order, $200.00 

Two  Hundred  no-ioo Dollars 

for  value  received. 

JOHN  DOE. 

When  is  the  above  note  due? 

Silas  Warner  holds  the  above  note  until  April  2  at  which 
time  he  discounts  it  at  the  bank.  The  bank  will  advance  him 
money  on  this  note.  Silas  Warner  will  thus  be  using  the  bank's 
money  from  April  2  until  the  note  is  due,  at  which  time  the 
bank  will  receive  $200  from  John  Doe.  This  being  the  case, 
the  bank  should  receive  pay  for  the  use  of  its  money  from  April 
2  until  the  note  is  due  from  Silas  Warner.  This  is  done  by  com- 
puting interest  on  the  note  for  the  length  of  time  it  still  has  to 
run  and  deducting  this  from  $200,  the  bank  paying  Silas  War- 
ner the  proceeds.  This  deduction  is  called  discount. 

If  the  rate  is  7%,  how  much  will  Silas  Warner  receive  on 
the  above  note?  (It  is  customary  in  banking  to  deduct  discount 
for  the  exact  number  of  days.) 


35 
What  are  the  proceeds  of  the  following  discounts: 


Face 

Date  of  Note 

Time 

Date  of  Dist. 

Rate 

35. 

$300 

Feb.  12 

30  days 

Man  i 

6% 

36. 

$435 

Sept.   10 

45  days 

Oct.  7 

7% 

37. 

$210 

Dec.  21 

3  mos. 

Jan.  17 

6% 

38. 

$750 

May  30 

10  days 

June  2 

6% 

39- 

$250 

July  15 

I  mo. 

July  25 

7% 

In  the  above  note  made  by  John  Doe,  there  is  no  promise 
to  pay  interest.  If  there  were  included  in  the  note  a  promise  to 
pay  interest,  the  note  would  be  worth  more  than  $200  when  it 
comes  due,  and  the  bank  would  receive,  when  it  is  paid,  $200 
plus  the  interest,  thus  as  the  bank  receives  more  than  $200  it 
should  give  Silas  Warner  proportionately  larger  proceeds.  This 
being  the  case,  the  discount  on  interest  bearing  notes  is  figured 
on  the  face  plus  the  interest. 

Suppose  the  above  note  bears  interest  at  6%,  then : 

$2.oo=Interest  for  2  mos.  at  6%. 
i  .oo=Interest  for  i  mo.  at  6%. 

$3.oo=Interest  for  3  mos.  at  6%. 
$200.00 

$203.00= What  note  is  worth  when  due. 
$2.03=Interest  for  60  days  at  6%. 
.o6"7=4nterest  for  2  days  at  6%. 

$2.097=Interest  for  62  days  at  6%. 
.349=Interest  for  62  days  at  i%. 

$2.446=Interest  for  62  days  at  7%. 
$203.00 

2.446=Discount  for  62  days  at  7%. 


$200.554=^Proceeds  due  Silas  Warner. 


Find  the  proceeds  in  the  following  problems: 
Face        Date  of  Note        Time     Rate  of  Int.     Date  Dis.     Rate  D is. 


40.  $375  Feb.  28,  '07 

41.  $1250  Dec.  12,  '07 

42.  $425  July  6,  '07 

43.  $2000  Sept.  20,  '06 

44.  $1850  Mar.  i,  '07 


3  mos.  6%  April  2          7% 

30  days  7%  Dec.  27          7% 

10  days  6%  July  7  7% 

6  mos.  6%  Jan.  23,  '07  6% 

60  days  5%  Mar.  29,  '07  6% 


Leaving  out  the  interest,  find  the  proceeds  in  each  of  the 
last  five  problems. 


THE  CASH  BOOK. 

Thus  far  in  your  bookkeeping  work,  when  cash  was  re- 
ceived, you  have  made  a  journal  entry  debiting  cash  and  credit- 
ing some  other  account.  When  cash  was  paid  out,  you  have 
credited  cash  and  debited  some  other  account  in  the  journal. 
When  these  items  .were  all  posted,  all  cash  received  appeared  on 
the  debit  side  of  the  cash  account,  and  all  cash  paid  out  appeared 
on  the  credit  side  of  the  cash  account.  The  difference  between 
the  total  debits  and  total  credits  showed  the  cash  on  hand.  To 
increase  the  debit  of  the  account  increases  the  cash  on  hand.  To 
increase  the  credit  side  of  the  account  decreases  the  cash  on  hand. 


37 


You  will  keep  a  cash  book  instead  of  a  cash  account  in  the 
ledger  in  the  following  transactions.  The  cash  book  is  your  cash 
account.  Take  a  sheet  of  journal  paper  and  rule  it  as  shown  in 
the  illustrative  cash  book.  Be  sure  to  have  two  columns  at  the 
Itft  of  each  page,  one  for  the  date  and  one  for  the  ledger  pages. 
Write  the  word  "Cash"  at  the  top  of  each  page.  On  the  left- 
hand  page,  or  debit  side,  enter  all  cash  debits  or  cash  received. 
When  cash  is  received  and  debited,  some  account  which  pro- 
duces the  cash  is  credited.  Write  the  name  of  the  account  to  be 
credited  in  the  wide  column  of  the  left-hand  page,  on  the  same 


line  with  the  amount  and  date,  and  follow  the  account  name,  on 
the  same  line,  with  a  brief  explanation  of  the  transaction.  On 
the  right-hand  page,  on  credit  side,  enter  all  cash  credits  or  cash 
paid  out.  When  cash  is  paid  out  and  credited,  write  the  name  of 
the  account  to  be  debited  in  the  wide  column  of  the  right-hand 
page,  on  the  same  line  with  the  amount  and  date,  and  follow  it 
with  a  brief  explanation  of  the  transaction.  By  this  plan  of  en- 
tering transactions  involving  cash,  the  word  cash  does  not  have 
to  be  written  and  the  amount  is  written  but  once,  thus  saving 
much  time  and  labor. 

For  example,  the  first  entry  on  the  debit  side  of  the  illustra- 
tive cash  book,  is  the  same  as  Cash,  Dr.,  $2000,  and  J.  M.  Doane, 


38 

(Jr.,  $2000,  the  second,  Cash,  Dr.,  $3640,  and  Merchandise,  Cr<, 
$36.40.  On  the  credit  side,  the  first  entry  is  the  same  as  Ex- 
pense, Dr.,  $65,  and  Cash,  Cr.,  $65,  the  second,  Furniture  and 
Fixtures,  Dr.,  $145,  and  Cash,  Cr.,  $145. 

Make  the  following  entries  in  accordance  with  your  answers 
to  the  questions:  "What  account  receives  or  costs  value?"  and 
"What  account  produces  or  supplies  value?" 

May  i.  J.  Walter  Lang  commenced  business  investing 
$2000  in  cash. 

Paid  one  month's  store  rent  in  advance,  $50. 

2.  Received  invoice  of  Mdse.  from  J.  C.  Brice  &  Co.,  paid 
for  same  in  cash,  $410. 

Bought  counter,  shelves,  showcases,  etc.,  paying  for  same  in 
cash,  $232.50.  (Open  a  Furniture  and  Fixture  account  for  items 
of  this  kind.) 

Paid  for  books,  stationery,  etc.,  $13.60. 

3.  Deposited  cash  in  The  Second  National  Bank,  $1100, 
Sold  Mdse.  for  cash,  $18,35, 

Received  of  J.  M.  Snell  $38.70  in  cash  for  Mdse* 
Bought  for  cash  an  invoice  of  Mdse,    dated  May  2,  amount- 
ing to  $317.20. 

4.  Received  cash  for  Mdse.  sales,  $78,64. 
Paid  clerks'  salaries  for  week,  $18.75. 

Bought  for  cash  a  horse,  wagon  and  harness  for  use  in  de- 
livering Mdse.,  $475.  (Debit  horse  and  wagon  account  for  every- 
thing pertaining  to  this  part  of  business.) 

Received  for  invoice  of  Mdse.  sold  to  Charles  Brokaw, 
$86.90  in  cash. 

Received  for  cash  sales  of  Mdse.,  $88.25. 

Foot  the  debit  and  credit  sides  of  your  cash  book  In  pencil 
and  find  the  balance  of  cash  on  hand.  Refer  to  the  illustrative 
cash  book  and  close  your  cash  book  in  like  manner.  Caution : 
Be  sure  to  get  your  ruling  on  the  same  horizontal,  blue  line  of  both 
pages,  and  correct  in  other  details. 

Present  your  work  to  your  teacher  for  inspection. 


39 

May  6.  Mr.  Lang  makes  an  additional  investment  of  $100 
in  cash. 

Received  of  James  Marsh  for  Mdse.  $38.65. 

Bought  of  Upton  &  Walsh  an  invoice  of  Mdse.  amounting  to 
$345,  and  paid  for  same  by  check  on  The  Second  National  Bank. 

7.  Mr.  Lang  decides  to  largely  increase  his  stock  of  Mdse. 
and  in  order  to  do  so  he  will  need  more  ready  cash.    He  has  ar- 
ranged with  The  Second  Natiooal  Bank  for  a  loan  of    $1000. 
This  amount  has  been  placed  to  the  credit  of  his  account  at  the 
bank  and  he  has  given  his  thirty-day  note,  bearing  interest  at 
7%,  for  the  same.     (No  entry  is  made  for  interest  until  it  is 
actually  paid  or  received.) 

Received  for  sundry  cash  sales  during  the  day,  $94.52. 

Mr.  Lang  has  placed  an  order  with  the  Kuhn-Snyder  Co., 
of  San  Francisco,  for  $950  worth  of  Mdse.  This  Mclse.  is  to 
be  shipped  at  once  and  will  probably  be  received  in  about  a  week. 
(The  entry  for  this  purchase  will  be  made  when  the  good  are 
received.  No  entry  is  necessary  in  placing  an  order.) 

8.  Mr.  Marsh  returns  a  part  of  the  Mdse.  sold  him  on  the 
sixth  as  it  is  not  satisfactory.    We  refund  $12.17  f°r  the  same. 

Paid  for  advertisement  in  The  Evening  News,  $24. 
Sold  Mdse.  amounting  to  $76.55  for  cash. 

9.  Received  for  sundry  cash  sales  of  Mdse.  $94.43. 

10.  Bought  for  cash,  of  R.  C.  Boynton,  Mdse.  amounting 
to  $31.50. 

Cash  sales,  $87.24. 

10.  Mr.  Lang  has  decided  that  it  would  be  advantageous  to 
allow  credit  to  certain  customers.     From  this  time  on,  sales  on 
account  will  be  entered  in  the  Journal.     (Get  a  sheet  of  Journal 
paper  for  your  Journal.) 

Sold  W.  J.  Amos  Mdse.  on  account  amounting  to  $22.75. 
Sold  Mrs.  Herbert  Sidney,  on  account,  Mdse.,  amounting  to 
$125. 

11.  Bought  of  the  Keystone  Produce  Co.,  on  account,  an 
invoice  of  vegetables,  amounting  to  $102. 


40 

Sold  J.  C.  Donovan  Mdse.  amounting  to  $50,  receiving  in 
payment  his  5  day  note,  without  interest. 

Traded  horse  and  wagon  with  C.  E.  Stoner,  receiving  as  a 
bonus  his  lo-day  note,  in  our  favor,  for  $125,  bearing  interest 
at  6%. 

Sold  Wallace  &  Son,  for  cash,  Mdse.  amounting  to  $125.60, 

Cash  sales  for  day,  $101.73. 

Paid  clerks'  salaries  for  week,  $27.50. 

Paid  stable  bill  for  the  keeping  of  the  hofse  and  wagon 
for  week,  $5.25. 

Mr.  Lang  withdrew  $15  in  cash  for  private  use. 

Close  your  cash  book  in  the  same  manner  as  on  the  4th  and 
present  your  work  for  inspection^ 

In  the  entries  you  have  been  making,  when  cash  was  debit- 
ed, you  wrote  the  name  of  the  account  to  be  credited  on  the  lefr> 
hand  side  of  the  cash  book  oh  the  same  line  with  the  amount, 
date,  etc.  Your  posting  to  the  Cash  account  is  already  done  as 
the  Cash  Book  is  your  Cash  account.  It  is  now  necessary,  in 
order  to  complete  the  other  accounts,  to  open  in  the  ledger  such 
accounts  as  are  named  in  the  explanation  columns  of  the  Cash 
Book.  CREDIT  the  accounts  named  on  the  left-hand  side  of 
the  Cash  Book.  As  cash  account  is  already  debited,  posting  to 
the  credit  of  these  accounts  will  give  the  balancing  entries.  In 
like  manner,  post  to  the  debit  side  of  the  accounts  named  on  the 
right-hand  side  of  the  Cash  Book.  As  Cash  account  is  already 
credited  this  will  complete  the  balancing  entries  for  these  trans- 
actions. 

Take  a  trial  balance  after  the  posting  is  completed.  Re- 
member your  Cash  Book  is  youf  Cash  account,  and  as  it  is  neces- 
sary to  include  all  accounts  that  do  not  balance  in  your  trial 
balance,  it  is  necessary  to  include  the  balance  of  the  Cash  Book 
whenever  taking  a  trial  balance. 

May  13.  Received  cash  of  W.  J.  Amos  to  apply  on  account, 
$12. 

Part  of  the  Mdse.  bought  of  R.  C.  Boynton  on  the  tenth  is 


41 

unsalable.     We  return  the  damaged  portion  and  receive  a  cash 
refund  of  $6.25. 

Received  of  Mrs.  Herbert  Sidney,  cash  to  apply  on  account, 


Sundry  cash  sales  for  day,  $72.54. 

14.  Paid  Upton  &  Walsh  cash  to  apply  on  account,  $50. 
Paid  the  Keystone  Produce  Co.,  to  apply  on  account,  $75. 
Bought  of  C.  A.  Springer  one  load  of  potatoes,  paying  for 

same  in  cash,  $32.50. 

Cash  sales  for  day,  $93.51. 

15.  The  merchandise,  ordered  of  the  Kuhn-Snyder  Co.  on 
the  seventh,  amounting  to  $950,  has  been  received  and  checked. 
(Wrhen  buying,  no  entry  is  made  until  the  merchandise  is  actual- 
ly received  and  checked  up.    Treat  this  transaction  as  a  purchase 
on  account  for  the  full  amount.) 

Mr.  Lang  has  drawn  a  check  on  The  Second  National  Bank, 
for  $501.25,  with  which  he  will  purchase  a  draft  of  $500,  paying 
$1.25  exchange,  and  remit  the  draft  to  the  Kuhn-Snyder  Co.  to 
apply  on  account.  (The  cost  of  making  this  remittance,  or  the 
exchange  on  the  draft,  is  a  part  of  the  expense  of  carrying  on 
the  business.  Treat  the  remittance  as  a  payment  on  account.) 

Mr.  Lang  has  loaned  Jas.  Marsh,  on  his  promissory  note, 
$100,  date  of  note  May  15,  due  30  days  after  date,  without  in- 
terest. 

Mr.  Lang  has  taken  the  above  note  to  The  Second  National 
Bank  and  had  it  discounted  at  7%,  the  proceeds  placed  to  his 
credit.  (Two  entries  are  necessary,  one  for  loaning  the  money 
and  the  other  for  discounting  the  note.) 

Cash  sales  for  day  $106.34. 

1  6.     Mr.  Lang  withdrew  cash  for  private  use,  $25. 

J.  C.  Donovan  pays  his  note  of  the  nth  inst.,  in  our  favor, 
face  of  note  $50. 

Cash  sales,  $99.65. 

17.     Paid  for  having  horse  shod,  $2. 

Paid  Walter  Jenks  for  Mdse.  $15.35. 

Sundry  cash  sales  $104.35. 


42 

i8.     Paid  stable  bill  for  week,  $5.25, 

Cash  sales  $114.70. 

Paid  clerks'  salaries  for  week,  $27.50. 

Close  your  cash  book  and  present  your  work  for  inspection. 

May  20.  Mr,  Lang  loans  W,  J.  Amos,  a  customer,  $5  on 
account,  for  a  few  days. 

Remitted  the  Kuhn-Snyder  Co.  a  San  Francisco  bank  draft 
of  $450,  to  apply  on  account.  Exchange  on  draft  $1.25. 

Cash  sales  $69.30. 

21.  As  we  now  have  sufficient  cash  on  hand,  Mr.  Lang  has 
paid  his  note  of  the  seventh  in  favor  of  The  Second  National 
Bank  with  interest  for  the  time  it  has  run.     (Make  two  entries, 
one  for  the  note,  the  other  for  the  interest.) 

Received  of  Mrs.  Herbert  Sidney,  to  apply  on  account, 
$12.50. 

Paid  Upton  &  Walsh,  on  account,  $50. 
Cash  sales  for  day,  $84.96. 

22.  Mr.  Lang  has  discovered  that  one  dollar  of  the  money 
received  yesterday  is  a  counterfeit.  (Charge  to  Loss  and  Gain.) 

Mr.  Lang  withdrew  for  private  use,  $10. 
Cash  sales,  $17.29. 

23.  Received  cash  of  C.  E.  Stoner  for  his  note,     in     our 
favor,  due  today,  face  of  note  $125,  interest  on  same  25c. 

Received  cash  of  Mrs.  Herbert  Sidney  in  full  of  account. 

Paid  the  balance  due  the  Keystone  Produce  Co.,  on  account. 
Cash  sales  for  day  $92.10. 

24.  Loaned   Milton  Brown  on  his  9O-day  note,   with   in- 
terest at  6%,  $50. 

Mr.  Lang  discounts  the  above  note  at  The  Second  National 
Bank  at  7%,  receiving  credit  for  the  proceeds. 

25.  Paid  the  following  expenses  for  the  week :    Stable  bill, 
$5.25;  Salaries,  $27.50. 

Cash  sales,  $111.16. 

Close  your  cash  book  and  present  your  work  for  Inspection. 

Read  again  the  explanation  of  the  posting  given  under  May 

II.     Post  your  work  and  take  a  trial  balance.     The  inventories 


43 

are  as  follows :  Merchandise  $850,  Furniture  and  Fixtures  $200, 
Horses  and  wagon  $275.  Make  out  financial  statements  and 
close  the  ledger. 

Present  your  work  for  inspection. 

COMMISSION. 

Certain  localities  or  communities  generally  produce  some 
few  staple  articles  of  commerce  in  such  abundance  as  to  make 
it  impossible  to  use  all  of  the  supply  in  that  immediate  vicinity. 
Thus  a  locality  will  grow  more  wheat  than  it  can  use;  another 
locality  will  produce  more  butter  than  it  needs;  another  more 
fruit;  etc.  Supplies  of  all  kinds  are  generally  in  demand  in  the 
cities,  so  we  find  in  the  cities  men  and  firms  who  make  a  busi- 
ness of  finding  buyers  for  the  men  who  have  any  surplus  pro- 
duce, provisions,  live  stock,  etc.,  to  dispose  of;  for  this  service 
these  men  or  firms  generally  charge  a  certain  per  cent,  of  the 
gross  selling  price,  and  this  charge  is  called  commission,  while 
those  engaged  in  this  work  are  said  to  be  in  the  commission  busi- 
ness. Men  or  firms  in  the  commission  business  usually  maintain 
offices  and  warehouses  or  stores  at  which  they  receive  the  com- 
modities that  they  sell  for  others.  Commodities  thus  received 
to  be  sold  for  the  owners  are  known  as  consignments. 

As  the  commission  merchant  must  make  returns  to  the  own- 
er for  each  consignment  received,  he  opens  a  separate  account  for 
each  consignment  received,  numbering  it,  and  to  aid  in  dis- 
tinguishing the  consignments  from  each  other,  generally  adds 
the  name  of  the  consignor  as  a  part  of  the  account  title^  Ex- 
ample: Consignment  No.  12,  Chas.  Howe.  Remember  these 
consignment  accounts  are  entirely  separate  from  any  personal 
account  you  may  have  with  the  same  party.  Debit  each  separate 
consignment  account  for  all  costs  (freight,  drayage,  insurance, 
commission,  net  proceeds,  etc.)  Net  proceeds  is  the  amount  clue 
the  owner  after  all  charges  have  been  deducted.  Credit  each 
separate  consignment  account  for  all  it  produces  (receipts  from 
sale  of  the  consignment). 


44 

It  is  a  common  practice  for  commission  men  to  tmy  com- 
modities and  ship  them  to  other  localities  to  be  sold  for  them  on 
commission.  Merchandise  shipped  by  the  owner  to  another  to 
be  sold  on  commission  is  known  to  the  owner  as  a  shipment. 

When  property  is  shipped  to  be  sold  on  commission,  a  sep- 
arate account  with  each  shipment  is  opened  on  the  books  of  the 
owner  to  represent  the  separate  lots  of  property  that  have  gone 
out  of  his  possession  but  not  his  ownership.  Of  course,  the 
owner  wants  to  know  whether  he  is  losing  or  gaining  on  each  ship- 
ment and  how  much,  so  it  is  necessary  to  have  a  separate  account 
with  each  shipment  made.  To  help  distinguish  the  shipments, 
generally  the  name  of  the  party  to  whom  shipped  and  the  number 
of  the  shipment  are  added  to  the  account  title.  Example :  Ship- 
ment No.  5,  W.  E.  Smith  &  Co.  Remember  that  these  shipment 
accounts  are  entirely  separate  from  any  personal  account  which 
you  may  have  with  the  same  parties.  Debit  each  separate  ship- 
ment account  for  all  costs  (the  value  of  the  property  shipped — 
usually  the  cost  price,  and  all  expenses  incurred  in  making  the 
shipment).  Credit  each  separate  shipment  account  for  what  it 
produces  (net  proceeds). 

Journalize  the  following  transactions : 

June  I.  Student  (as  proprietor)  commenced  the  shipping 
and  commission  business  and  invested  $4250  cash. 

Bought  for  cash,  100  tubs  butter,  5000  Ibs.,  at  24^  cts. ; 
100  crates  eggs,  3000  doz.,  at  27  cts. ;  50  boxes  cheese,  3000  Ibs., 
at  17  cts. 

4.  Shipped  to  Dayton  &  Cole,  San  Francisco,  to  be  sold  on 
my  account  and  risk,  50  tubs  butter,  2500  Ibs.,  invoiced  at  24^  cts. 
Paid  cartage  on  same  in  cash,  $2.50.  (What  account  is  opened? 
Why?  Review  the  explanation  of  shipment  accounts.) 

6.  Shipped  to  the  Woodlawn  Com.  Co.,  Oakland,  to  be  sold 
on  my  account  and  risk,  50  crates  eggs,  1500  doz.,  invoiced  at  27 
cts.  Paid  cartage  in  cash,  $3. 

9.  Received  from  Mann  &  Co.,  Redlands,  to  be  sold  on 
their  account  and  risk,  20  boxes  naval  oranges.  Paid  freight 


45 

and  cartage  in  cash,  $5.25.     (What  account  is  opened?    Why? 
Review  explanation  of  consignment  accounts.) 

11.  Received  from  Tracey  &  Sons,  Riverside,  to  be  sold 
on  their  account  and  risk,  40  boxes  lemons.     Paid  freight  and 
cartage  in  cash,  $10.50. 

12.  Received  from  Dayton  &  Cole,  an  account  sales  of  the 
butter  shipped  them  on  the  4th  inst.     My  net  proceeds  remitted 
in  cash,  $695.25.     {What  account  is  debited?    Credited?    Why? 
What  does  the  difference  between  the  two  sides  of  the  "Ship- 
ment No.  i,  Dayton  &  Cole"  account  show?    Why?) 

13.  Sold,  for  cash,  20  boxes  naval  oranges,  belonging  to 
Mann  &  Co.'s  Consignment  No.   I,  at  $2.75.      (What  account 
is  debited?    Credited?    Why?) 

Closed  Mann  &  Co.'s  Consignment  No.  I  and  rendered  them 
an  account  sales.  Storage  charges,  $i ;  commission  10%  on 
sales ;  Mann  &  Co.'s  net  proceeds  remitted  in  cash.  (What  does 
the  debit  side  of  the  account  with  Mann  &  Co.'s  Consignment 
No.  i  show?  Credit?) 

16.  Received  from  J.  J.  George,  San  Diego,  to  be  sold  on 
his  account  and  risk,   100  bunches  bananas.     Paid  freight  and 
cartage  in  cash,  $7.50. 

17.  Shipped  Kranston  &  Co.,  Salt  Lake  City,  to  be  sold  on 
my  account  and  risk,  50  boxes  cheese,  3000  Ibs.,  invoiced  at  17 
cts.     Paid  cartage  in  cash,  $2. 

19.  Sold,  for  cash,  25  tubs  butter,  1250  Ibs.,  at  32^  cts.; 
25  crates  eggs,  750  doz.,  at  29  cts. 

20.  Received  from  the  Woodlawn  Com.  Co.,  an  account  sales 
of  the  50  crates  eggs  shipped  to  them  on  the  6th  inst.    My  net  pro- 
ceeds in  cash,  $402.10. 

22.  Bought  of  the  Purity  Dairy  Co.,  on  account,  25  tubs 
butter,  1250  Ibs.,  at  24  cts. 

23.  Sold,  for  cash,  from  Tracey  &  Son's  Consignment  No. 
i,  40  boxes  lemons  at  $3.25. 

Closed  Tracey  &  Son's  Consignment  No.  i,  and  rendered 
them  an  account  sales.  Storage  charges,  $2.15;  commission  10% 
on  sales;  their  net  proceeds  remitted  in  cash. 


46 

24.  Shipped  Knowlton  Bros.,  San  Francisco,  to  be  sold  on 
my  account  and  risk,  25  tubs  butter,  1250  Ibs.,  invoiced  at  24 
cts.  Paid  cartage  in  cash,  $1.75. 

26.  Received  from  Kranston  &  Co.,  an  account  sales  of 
cheese  shipped  them  on  the  I7th  inst.     Net  proceeds,  due  in  30 
days,  placed  to  my  credit,  $571. 

27.  Received  from  Mann  &  Co.,  Redlands,   (Consignment 
No.  2)  to  be  sold  on  their  account  and  risk,  15  bbls.,  1500  pine- 
apples.    Paid  freight  and  cartage  in  cash,  $5.80. 

28.  Sold  D.  D.  Pratt  &  Co.,  City,  on  account,  from  J.  J. 
George's  Consignment  No.    I,    100  bunches  bananas  at  $2.95 ; 
from  my  stock  of  merchandise,  25  crates  eggs,  750  doz.,  at  28^2 
cis. 

Closed  J.  J.  George's  Consignment  No.  I,  and  rendered  him 
an  account  sales.  Storage  charges,  $2.25,  commission  10%  on 
sales ;  his  net  proceeds,  due  in  30  days,  placed  to  his  credit. 

29.  Sold,  for  cash,  from  Mann  &  Co.'s  Consignment  No. 
2;  8  bbls.,  800  pineapples,  12^  cts. 

Post  (two  accounts  to  page)  and  take  a  trial  balance.  Re- 
member that  shipment  or  consignment  accounts  represent  mer- 
chandise and  must  not  be  confused  with  the  personal  accounts  of 
the  parties  to  whom  shipments  are  made  or  from  whom  consign- 
ments are  received. 

Make  financial  statements.  For  what  are  shipment  accounts 
debited?  Credited?  Shipment  accounts,  at  the  time  of  closing 
the  books,  may  show  the  following  conditions :  The  shipment 
made  and  all  costs  charged  but  no  returns  received,  in  which 
case  the  shipment  is  generally  considered  a  resource  inventory 
for  the  full  amount  of  the  cost.  The  shipment  made  and  all 
costs  charged  and  the  returns  for  a  partial  sale  of  the  shipment 
credited,  in  which  case  the  unsold  portion  is  generally  treated 
as  a  resource  inventory  at  cost,  and  this  inventory  added  to  the 
credit  causes  the  account  to  show  either  a  loss  or  gain  on  the 
sold  portion  (same  as  merchandise  account).  The  shipment 
made  and  charged  with  all  the  costs  and  credited  with  the  entire 
net  sales,  in  which  case  the  shipment  shows  a  loss  or  gain. 


47 

For  what  are  consignment  accounts  debited?  Credited? 
The  following  conditions  may  be  shown  by  consignment  accounts 
at  the  time  of  closing  the  books :  The  consignment  received  and 
debited  for  the  charges  advanced  but  no  sales  made,  in  which 
case  the  amount  advanced  is  a  resource.  The  consignment  re- 
ceived and  debited  for  the  advanced  charges  and  credited  with 
partial  sales,  in  which  case  the  account  shows  a  liability  for  the 
amount  of  the  sales  less  the  advanced  charges.  (The  charges 
earned  on  the  part  sold  but  not  yet  entered,  are  treated  as  a  re- 
source inventory  in  commission,  storage,  etc.)  The  consign- 
ment received  and  debited  for  all  advanced  charges,  charges 
earned  in  making  the  sales  and  the  net  proceeds,  and  credited 
for  the  sales  of  the  entire  consignment,  in  which  case  the  account 
balances. 

Inventories:  Merchandise,  25  tubs  butter,  1250  Ibs.,  at  24 
cts. ;  Commission  earned  on  Consignment  No.  2,  Mann  &  Co. 
but  not  entered,  $10;  Shipment  No.  I,  Knowlton  Bros.,  $301.75. 

REVIEW  I. 

Make  use  of  the  index  in  finding  answers  to  the  following 
questions:  What  is  a  business  transaction?  What  is  bookkeep- 
ing? What  is  the  rule  for  debits?  Credits?  What  Is  included 
under  the  title  of  cash?  What  is  merchandise?  What  are  per- 
sonal accounts? 

Journalize  the  following  on  a  half-sheet  of  journal  paper: 
Dec.   I.     Bought  of  R.  C.  Thompson,  for  cash,  200  bbls. 
flour  at  $4. 

2.  Sold  to  A.  H.  Warren,  for  cash,  50  bbls.  flour  at  $4.50. 

3.  Bought  of  Winter  Bros.,  for  cash,  300  bu.  corn  at  37 
cts.,  and  300  bu.  wheat  at  61  cts. 

4.  Sold  Wm.  Archer  &  Co.,  for  cash,  50  bbls.  flour  at  $4.50, 
and  100  bu.  corn  at  40  cts. 

5.  Bought  of  Arthur  McMillan,  for  cash,  100  bbls.  flour  at 
$3.90,  and  1 200  bu.  oats  at  33  cts. 

6.  Sold   Henry   Hamilton,   on   account,    10  bbls.  Hour   at 
$4.50. 


48 

7.  Received  cash  from  Henry  Hamilton,  on  account,  $30. 

8.  Bought  of  Henry  Hamilton,  on  account,  50  bu.  potatoes 
at  45  cts. 

9.  Henry  Hamilton  returns  2  bbls.  flour  which  was  dam- 
aged, we  credit  the  same  on  account  at  $4.50  each. 

10.  Sold  Arthur  Grayden,  on  account,  25  bu.  potatoes  at 
53  cts. 

We  have  the  following  inventory :  192  bbls.  flour  at  $3.95 ; 
200  bu.  corn  at  37  cts.;  300  bu.  wheat  at  61  cts.;  1200  bu.  oats 
at  33  cts.;  25  bu.  potatoes  at  46  cts.  What  has  been  gained  or 
lost  on  merchandise? 

Does  the  business  owe  Henry  Hamilton  or  does  he  owe  the 
business  and  how  much? 

REVIEW  II. 

What  is  included  under  the  title  of  Bills  Receivable?  Bills 
Payable? 

Jan.  i.  You  begin  a  general  merchandise  business  with  no 
investment. 

Borrowed  $5000  from  the  City  Bank  on  your  3O-day  note. 

Gave  J.  Benson  your  lo-day  note  in  payment  of  rent  of 
store  for  one  month,  $100. 

2.  Bought  a  bill  of  merchandise  from  John     Henderson, 
amounting  to  $5000,  and  gave  him  your  note  at  thirty  days,  with 
interest,  in  payment  of  same. 

Sold  H.  Mason,  on  account,  2-10,  n~3O,  3000  bu.  wheat  at 
80  cts. 

3.  Bought  a  horse  and  wagon  from  J.  W.  Brown  and  had 
the  same  charged  to  your  account,  $500.      (Open   Horse   and 
Wagon  account.) 

4.  Sold  John  Davidson,  */2  cash,  balance  1 5-day  note,  5000 
bu.  wheat  at  80  cts.,  2000  bu.  corn  at  50  cts. 

5.  Received  of  H.  Mason  his  note  at  15  days  from  Jan.  2, 
for  the  full  amount  of  his  bill  of  that  date. 


49 

8.  Accepted  J.  W.  Brown's  1 5-day  sight  draft  on  you,  in 
favor  of  H.  E.  Rose,  in  full  payment  of  the  horse  and  wagon 
purchased  on  the  third. 

ii.     Paid  your  note  of  Jan.  i,  due  today,  by  check. 

14.  Sold  H.  Mason  a  bill  of  merchandise  amounting  to 
$2000,  receiving  in  payment  a  draft  at  three  days  sight,  on  H. 
E.  Wing,  of  this  city,  which  the  drawee  has  this  day  accepted. 

1 6.  Bought  of  John  Martin  a  bill  of  merchandise,  amount- 
ing to  $2500.  Gave  in  payment  the  acceptance  received  on  the 
1 4th,  and  your  personal  note  at  ten  days,  with  interest,  for  the 
balance. 

19,  Received  of  John  Davidson  a  sight  draft,  on  Henry 
Jameson,  in  full  payment  of  his  note  due  today. 

21.  Sold  Henry  Webb  a  bill  amounting  to  $1000,  receiv- 
ing in  payment  his  note  at  15  days  for  $500,  and  a  3<>day  draft, 
on  Ira  Johnson,  for  the  balance. 

23.  Paid  acceptance  of  the  8th  hist,  favor  of  H.  E.  Rose, 
by  check. 

Wfiat  is  the  face  value  of  the  notes  you  hold  against  others  ? 
What  is  the  face  value  of  the  notes  held  by  others  against  you? 

REVIEW  III. 

What  is  included  in  the  expense  account?  What  is  real 
estate  ? 

As  bookkeeper  for  J,  Martin  Snow,  journalize  the  following, 
providing  a  separate  account  for  each  separate  piece  of  real 
estate : 

Feb.  i.  Bought  of  the  Sunset  Realty  Co.,  a  dwelling  and 
five  lots,  looi  to  1009  Pacific  Grove  Ave.,  for  $6750.  Gave  in 
payment  cash  $5000  and  my  6-mos.  note,  with  interest  at  6%,  for 
the  balance.  (Open  an  account  with  Pacific  Grove  Ave.  Real 
Estate.) 

2.  Mr.  Snow  has  rented  an  office,  1126  Braly  Bldg.,  paying 
one  month's  rent,  $35,  in  advance.  This  office  will  be  used  in 
carrying  on  his  business. 


So 

3.  Bought  of  Barker  Bros.,  on  account,  10  days,  I  roll  top 
desk,  $60;  I  office  chair,  $6;  I  office  table,  $14;  4  plain  chairs  at 
$3.25;  i  clerk's  desk,  $20;  and  i  Macey  letter  file,  $18.     (Open 
Furniture  and  Fixture  account.) 

4.  Mr.  Snow  paid  Joe  Blaine  for  cleaning  windows  and 
scrubbing  floor  of  office,  $2.50. 

5.  Bought  of  Niles  Pease  Furniture  Co.,  for  cash,  i  Wilton 
rug,  $22.50,  for  use  in  office. 

6.  Paid  Wallace  &  Son  for  painting  dwelling,  1009  Pacific 
Grove  Ave.,  $74.25  in  cash. 

6.     Paid  bill  for  office  telephone,  i  month  in  advance,  $4. 
8.     Bought  for  cash  office  books,  stationery,  etc.,  amounting 
to  $18.60. 

8.  Rented  dwelling,  1009  Pacific  Grove  Ave.,  to  W.  S.  Mil- 
ler, receiving  one  month's  rent  in  advance,  $22.50. 

9.  Mr.    Snow   has   purchased   3   lots,   4562-4566   Vermont 
Ave.,  giving  in  payment  a  check  on  First  National   Bank   for 
$4720. 

10.  Paid  water  tax  for  dwelling  1009  Pacific  Grove  Ave., 

$1.55- 

1 8.     Paid  Burke  Bros,  for  new  cement  walk  and  curbing, 

4562-6  Vermont  Ave.,  $113  in  cash. 

1 8.     Paid  Barker  Bros,  in  full  for  invoice  of  3rd  inst. 

27.  Paid  an  assessment  on  Vermont  Ave.  property  for 
street  improvements,  $105. 

27.     Paid  taxes  on  Vermont  Ave.  property,  $12.45. 

27.  Sold  lots  looi  and  1003  Pacific  Grove  Ave.,  to  J.  R. 
Buell,  $2200,  in  cash. 

28.  Paid  L.  A.  Towel  Supply  Co.'s  bill  for  towels  sup- 
plied office  during  month,  $1.25. 

28.  Returned  clerk's  desk,  purchased  on  the  3rd  inst.,  to 
Barker  Bros.,  at  a  discount  of  10%  from  cost,  and  purchased 
from  same  firm  a  flat-top  typewriter  desk  at  $28,  paying  balance 
in  cash. 

28.  Paid  rent  on  typewriter  for  J/£  month,  $2.  Paid  for 
advertising  Pacific  Grove  Ave.  property,  $22. 


If  the  office  books,  stationery,  etc.,  now  on  hand  are  worth 
,  what  was  the  expense  to  Mr.  Snow  of  carrying  on  his  busi- 
ness for  the  month?  Mr.  Snow  estimates  his  Pacific  Grove  Ave. 
property  remaining  unsold  to  be  worth  $5000,  Has  he  gained  or 
lost  on  this  property  and  how  much?  If  the  Vermont  Ave. 
property  is  worth  $5200,  how  much  has  he  gained  or  lost  on  this 
property  ? 

REVIEW  IV. 

What  is  interest?  Discount?  Merchandise  Discount  is  an 
allowance  made  on  a  bill  of  merchandise  for  payment  within  a 
certain  specified  time.  Bills  Receivable  and  Bills  Payable  should 
always  be  entered  at  their  face  value.  Journalize  the  following: 

Feb.  i.  You  owe  Jesse  Warner  $512.  Give  him  cash  for 
y2  the  amount  and  your  note  at  ten  days,  with  interest,  for  the 
balance. 

2.  H.  M.  Zaner  pays  you  the  interest  accrued  on  his  note 
in  cash,  $16.45. 

3.  John   King  prepays  an  invoice,   previously  charged  to 
his  account,  amounting  to  $186.     You  allow  him  a  discount  of 
2%  and  receive  the  balance  in  cash. 

4.  You  pay  the  interest  on  your  note  in  favor  of  Frank 
Storm,  in  cash,  $23.06. 

5.  You  have  Isaac  Shaw's  note  for  $600,  at  90  days.    The 
note  has  run  for  30  days  and  you  discount  it  at  the  bank,  at  6%, 
and  receive  cash  for  the  proceeds. 

6.  Receive  cash  of  Geo.  Burns  for  his  note  and  interest  due 
today.     Face  of  note  $425 ;  interest  accrued  $10.65. 

7.  You  owe  Joel  Starr  $206  on  account  and  pay  the.  same 
in  cash,  less  3%. 

8.  There  is  a  mortgage  on  your  house  amounting  to  $2200. 
Today  one  year's  interest  is  due,  $110.     Settle  for  the  intere  ,t  by 
giving  your  note  at  10  days.     The  mortgage  is  held  by  Chas. 
Bennett. 

9.  You  have  John  Davis'  note  for  $400,  with  interest,  at 
60  days.    The  note  has  run  for  30  days,  and  you  discount  it  at  the 
bank,  at  6%,  and  receive  credit  for  the  proceeds. 


52 

io.  On  Jan.  12  you  bought  a  bill  of  merchandise  of  H, 
Johnson  amounting  to  $600,  terms:  2-10,  1-30,  net  60.  In  order 
to  get  the  benefit  of  the  discount  you  pay  the  same  by  check. 

ii*  Your  note  of  Feb.  i,  is  due  today.  Pay  full  amount 
by  check  on  City  Bank. 

12.  You  receive  today  William  Weaver's  3O-day  note  for 
$300,  without  interest.    You  discount  it  at  once  and  receive  cash 
for  the  proceeds.    Rate  of  discount  6%. 

13.  Your  note  in  favor  of  Samuel  Barnum,  for  $200  and 
interest  on  the  same,  $6.50,  is  due  today.    You  redeem  the  note 
and  interest  on  same  by  issuing  a  new  interest  bearing  note  for 
$206.50. 

The  interest  accrued  on  unpaid  notes  is  as  follows :  hills 
Receivable  $10.50;  Bills  Payable  $12.  What  has  been  the  loss 
or  gain  on  interest  and  discount  ?  What  is  the  difference  between 
the  two  sides  of  the  merchandise  discount  account,  and  what  does 
the  difference  show? 

REVIEW  V. 

The  entries  for  this  set  may  be  made  in  the  journal  or  in 
journal  and  cash  book.  Apply  to  your  teacher  for  directions 
concerning  what  books  to  use. 

April  i.  Hiram  Cooke  and  Laurence  Stoner  have  this  day 
formed  a  co-partnership  for  the  purpose  of  continuing  the  hay 
and  grain  business  previously  conducted  by  Mr.  Stoner.  In  ad- 
dition to  carrying  on  this  business,  they  will  loan  money  and 
deal  in  real  estate. 

Mr.  Cooke  invests  the  following  resources  and  liabilities : 

Cash  on  deposit  in  Commercial  Bank,  $7000. 

Note  made  by  John  Spring,  dated  March  1st,  at  two  months, 
with  interest  at  6%,  face  of  note,  $2000. 

Note  made  by  the  Western  Tool  and  Die  Co.,  dated  Feb. 
20,  at  90  days,  without  interest,  face  of  note  $1500. 

Interest  accrued  on  John  Spring's  note,  $10. 

Due  A.  W.  Jones  on  account,  $490. 

Due  Bolton  Bros.,  on  account,  $20. 


53 

Mr.  Stoner  invests  the  following: 

500  bu.  rolled  barley  @  60  cts. 

5  tons  wheat  @  $1.50  per  cwt» 

12  tons  alfalfa  @  $10  per  ton. 

18  tons  barley  hay  @  $9.50  per  ton. 

14  tons  straw  @  $6.50  per  ton. 

Horses,  wagons  and  harness  valued  at  $510. 

Wm.  Scott  owes  him  on  account  $24.50. 

Summerland  &  Co.,  owe  him  on  account,  $118. 

Mrs.  C.  L.  Patch  owes  him  on  account,  $54.25. 

McFarland  &  Swayne  Co.,  owe  him  on  account,  $211.20. 

He  owes  Marsh  &  Wallson,  account,  $67.50. 

He  owes  Bolton  Bros,  on  account,  $110. 

Cash  on  deposit  in  First  National  Bank,  $8427.55. 

The  firm  name  decided  upon  is  "The  Cooke- Stoner  Co." 

The  hay  and  grain  business  will  be  continued  at  325  E. 
Fourth  Street,  but  it  is  thought  best  to  open  an  "up-town"  office, 
chiefly  to  facilitate  the  real  estate  and  loan  part  of  the  firm's 
business. 

Rented  for  office  purposes  Room  12,  Lande's  Bldg.,  paying 
one  month's  rent,  $28,  in  advance. 

Bought  office  furniture  of  the  Excelsior  Furniture  Co.,  as 
per  invoice,  giving  our  check  for  $154.75  in  payment. 

Received  for  sundry  cash  sales  during  the  day  at  the  feed 
store,  $18.25. 

2.  Had  Home  telephone  installed  in  office     paying     one 
month's  rent  in  cash,  $6. 

Paid  Bolton  Bros,  cash  on  account,  $50. 
Paid  Walter  Smith  in  cash  for  cleaning  office  room,  $3. 
Loaned  Mrs.  Lillian  Swartz  on  her  note  at  30  days,  bearing 
interest  at  7%,  $250. 

Cash  sales  for  day  $17.35. 

3.  Received  of  McFarland  &  Swayne,  a   lo-day  note  for 
$200,  with  interest  at  6%,  to  apply  on  account. 

Bought  of  M.  C.  Adams,  10  lots,  Nos.  4700  to  4709  in- 
clusive, S.  Fulton  St.  Paid  for  same  in  cash  $3450. 


54 

Paid  L.  W.  Newitt  for  painting  sign  at  feed  store,  $4.50. 
Cash  sales  for  day,  $24. 

4.  Sold  Summerland  &  Co.,  Mdse.  amounting  to  $150.  Re- 
ceived cash  $100,  the  balance  on  account. 

The  Western  Tool  and  Die  Co.  today  arranged  to  take  up 
their  note  of  Feb.  20.  They  give  us  a  new  3O-day  note  for  $500, 
and  cash  for  the  remainder,  less  a  discount  of  6%. 

Cash  sales  for  the  day,  $19.55. 

5.  Bought  of  Marsh  &  Wallson  a  carload  of  alfalfa.    Gave 
in  payment  our  3O-day  note  for  $125,  balance  on  account,  $57.80. 

Paid  A.  W.  Jones,  cash  to  apply  on  account,  $300. 
Cash  sales  for  day,  $32.50. 
Paid  for  having  horses  shod,  $2. 

6.  Loaned  the   Southwestern   Wool   Co.,   on  their   3O-day, 
6%  note,  $2000. 

Paid  employees'  salaries  for  week,  $22.50. 
Cash  sales  for  day,  $41.60. 

8.  Paid  L.  W.  Newitt  for  lettering  on  office  door,  $1.25. 
Paid  for  stationery,  etc.,  $14.50. 

Took  out  a  six  months'  insurance  policy,  on  stock  and  equip- 
ment at  the  feed  store,  in  the  German  Fire  Insurance  Co.,  face 
of  policy,  $2000.  Paid  premium  of  i/4%  on  same  in  cash. 

Bought  lots  number  762  and  764  N.  Lake  St.,  of  the  Mutual 
Real  Estate  Co.  Lots  front  120  ft.  on  Lake  St.  and  are  125  ft. 
deep.  Terms  of  purchase  are  $100  per  front  foot,  %  cash,  bal- 
ance in  3  equal  notes,  one  for  six  months,  one  for  one  year,  and 
one  for  1^2  years,  each  bearing  interest  at  6%. 

9.  Paid  City  and  County  taxes  on  Fulton  St.  real  estate 
amounting  to  $14.60. 

Bought  of  Marsh  and  Wallson,  2-10,  n-3O,  10,450  Ibs.  Ro. 
Barley  @  69  cts.  per  cwt. 

Paid  our  note  of  the  5th  inst.,  favor  Marsh  and  Wallson,  in 
cash,  less  discount  at  6%. 

10.  Sold  R.  D.   Bunker,   2-10,    1-30,   Mdse.   amounting  to 
$315. 


55 

11.  Sold  Smith  &  Walton  lot  No.  4700  Fulton  St.,  for  $500, 
receiving  in  payment,  $400  cash,  balance  on  account. 

Received  of  Summerland  &  Co.,  $100,  cash,  to  apply  on  ac- 
count. 

12.  Loaned  the   Excelsior  Furniture  Co.   on  their  6o-day 
note  $1500,  deducting  interest  at  6%  in  advance. 

Loaned  Wm.  Scott  $10  on  account. 

13.  Paid  tax  on  Lake  St.  property  amounting  to  $28.70. 
Paid  wages  for  week,  $22.50. 

Mr.  Stoner  draws  cash  for  private  use,  $25. 
Cash  sales  for  week,  $378.45. 

15.  Sold  A.  C.  Hill,  2-10,  n-30,   12  tons  alfalfa  @  $13, 
5000  Ibs.  wheat  @  $1.63  per  cwt.,  3  tons  straw  @  $7.25.     Mr. 
Hill  hands  us  a  check  of  $200,  with  the  understanding  that  he 
is  to  receive  advantage  of  the  agreed  discount  on  the  payment 
made. 

Paid  a  special  assessment  of  $120,  for  cement  curbing  and 
street  improvements  on  Lake  St.  real  estate. 

16.  Bought  of  Mrs.  Jennie  Moore  the  frame  dwelling  now 
situated  at  910  Fulton  St.,  giving  in  payment  our  $9O-day  note, 
without  interest,  for  $2100.     We  have  made  arrangements  with 
Smith  &  Walton  to  move  this  house  on  to  No.  4709  of  our  Ful- 
ton St.  property. 

Sold  lot  No.  4702  Fulton  St.  to  Mrs.  C.  L.  Patch  for  $465. 
Received  cash  $350,  balance  on  account. 

Paid  for  janitor  services  for  office,  No.  12  Lande's  BIdg., 
to  date,  $5. 

17.  McFarland  &  Swayne  pay  their  note  of  the  3rd  hist., 
and  interest,  in  cash. 

Sold  Wm.  Scott,  Mdse.  amounting  to  $210.35,  on  account. 

1 8.  John  Spring  pays  his  note  of  March  ist  and  interest 
accrued  to  date  in  cash. 

19.  Sold  Charles  Miller  lot  No.  4708  Fulton  St.,  at  $510. 
Received  in  payment  his  3-day  sight  draft  on  L.  C.  Smith  for 
$210,  balance  in  cash. 


56 

Paid  Marsh  &  Wallson  in  full  for  invoice  of  the  gth  inst., 
less  2%. 

20.  Bought  of  A.  W.  Jones,  Mdse.  amounting  to  $416, 
terms:  3-10,  n-6o. 

Paid  employees'  wages  for  week,  $22.50. 

Mr.  Cooke  withdraws  for  private  use,  $35. 

Cash  sales  for  week,  $516.75. 

22.  Received  cash  in  full  for  draft  received  on  the   iQth 
inst. 

23.  Received  a  bill  from  Smith  &  Walton     for     moving 
dwelling  to  4709  Fulton  St.,  $250.    After  deducting  the  amount 
due  us  on  account,  we  pay  the  balance  of  this  bill  in  cash. 

24.  Received  cash  of  A.  C.  Hill  in  full  of  balance  due  on 
invoice  of  the  I5th  inst.,  less  2%. 

Sold  to  the  Carlton  Realty  Co.  our  Lake  St.  real  estate  at 
$133  1-3  per  front  foot.  Received  in  payment  cash  for  one-half 
and  their  6-months  note  for  the  balance. 

By  special  agreement  with  the  Mutual  Real  Estate  Co.,  we 
pay  our  three  notes  outstanding  against  this  property  and  inter- 
est accrued  to  date  in  cash. 

25.  Transferred  note  received  on  the  4th  inst.,  from  the 
Western  Tool  &  Die  Co.,  to  A.  W.  Jones  to  apply  on  account, 
less  discount  for  the  unexpired  time  at  6%. 

Bought  of  Bolton  Bros.,  Mdse.  amounting  to  $2480.  Gave 
in  payment  note  received  on  the  6th  inst.  from  the  Southwestern 
Wool  Co.,  receiving  credit  for  the  proceeds,  balance  on  account. 

26.  Paid  the  following  bills:  For  foundations  4709  Fulton 
St.,  $65.40;  for  plumbing  at  same  place,  $12.65 ;  for  painting  and 
repairing  at  same  place,  $93. 

Paid  employees'  wages  for  week,  $22.50. 

Summerland  &  Co.  have  failed  in  business.  Being  unable 
to  pay  their  debts  in  full,  they  have  compromised  with  their 
creditors  on  a  basis  of  65  cts.  on  a  dollar.  We  receive  a  check 
from  them  settling  their  indebtedness  to  us  on  this  basis. 

Cash  sales  for  the  week,  $472.60. 


57 

28.  Rented  house  and  lot  Xo.  4709  Fulton  St.  to  L.  A. 
Houseman  receiving  one  month's  rent,  $25,  in  advance. 

Paid  Bolton  Bros.,  in  full,  for  balance  of  invoice  of  the  25th 
inst.,  less  i%. 

29.  Paid  rent  for  feed  store  for  month  of  April,  $45. 

A  desk  purchased  on  the  ist  inst.,  of  the  Excelsior  Furni- 
ture Co.,  and  costing  $18,  was  today  exchanged  for  one  of  larger 
size,  and  the  difference  of  $7  paid  in  cash. 

30.  Paid  bookkeeper  and  stenographer's  salary  to  date,  $65. 
Paid  L.  A.  Towel  Supply  Co.'s  bill  for  month,  $1.25. 
Paid  sundry  expense  items  at  feed  store  in  cash,  $10.25. 
Cash  sales  to  date,  $214. 

Paid  Marsh  &  Wallson  to  apply  on  account,  $100. 

Mr.  Stoner  reports  the  following  inventories : 

Mdse.  on  hand,  $2060. 

Fulton  St.  real  estate,  $5330. 

Horse  and  wagon,  $500. 

Due  on  employees'  wages,  $12.50. 

Unused  stationery,  etc.,  $8. 

Furniture  and  fixtures,  $154. 

Post,  take  a  trial  balance,  make  out  financial  statements, 
and  close  all  accounts  affected  by  the  losses  or  gains  of  the  busi- 
ness. 

CORPORATIONS. 

The  principles  applied  to  corporation  bookkeeping  are  the 
same  as  those  applied  to  other  business  records.  The  representa- 
tion of  proprietorship  by  means  of  stock,  the  raising 
of  funds  by  assessments  and  aditional  sales  of  stock, 
the  dividing  of  profits  by  means  of  dividends,  the 
carrying  of  profits  as  surplus,  etc.,  necessitate  the  keeping  of  some 
records  and  accounts  which  do  not  occur  in  individual  or  partner- 
ship concerns.  The  following  transactions  are  arranged  for  prac- 
tice in  keeping  these  accounts  and  records.  Use  loose  paper  in 
pi  eparing  the  records  and  entries  for  these  exercises,  unless  other- 
wise instructed  by  your  teacher. 


58 

EXERCISE  NO.  i. 

W.  G.  Mills,  E.  O.  Saunders,  A.  C.  Steele,  R.  A.  Brooks  and 
L.  J.  Green  met  on  July  1st  to  organize  a  corporation  to  engage 
in  the  retail  lumber  business.  The  following  arrangements  have 
been  decided  upon :  Corporate  name  to  be  the  National  Mill  and 
Lumber  Co.,  capital  stock  $100,000,  shares  $100  each.  Each 
incorporator  to  subscribe  for  $15,000  worth  of  stock  at  par,  bal- 
ance of  the  stock  to  remain  in  the  treasury. 

Prepare  the  subscription  list  according  to  the  above  agree- 
ment. 

July  22.  Received,  from  the  Secretary  of  State,  authority 
to  begin  business.  Each  of  the  incorporators  has  paid  the  amount 
of  his  subscription  in  cash  and  received  his  certificate  of  stock. 

Make  the  proper  journal  and  stock  ledger  entries.  (Enter 
cash  through  the  journal — keep  no  cash  book  in  this  exercise.) 

Aug.  i.  Treasury  stock,  at  par,  has  been  subscribed  and 
paid  for  in  cash,  as  follows :  W.  G.  Mills  20  shares,  C.  C.  Stein- 
man  25  shares,  A.  C.  Steele  100  shares,  W.  P.  Swanson  105 
shares. 

Sept.  I.  On  account  of  the  large  investments  in  yards,  ma- 
chinery, buildings  and  stock,  it  has  been  found  necessary  to  raise 
additional  funds.  At  a  meeting  of  the  stockholders,  it  has  been 
decided  to  increase  the  capital  stock  to  $150,000,  and  the  follow- 
ing subscriptions  for  stock  at  par  were  received :  C.  O.  Paulin 
250  shares,  E.  D.  Wise  200  shares,  John  Simpson  50  shares. 

Sept.  10.  Received  cash  for  C.  O.  Paulin's  and  E.  D.  Wise's 
subscription  of  Sept.  1st,  and  issued  stock  certificates. 

Sept.  12.  The  Board  of  Directors,  by  special  arrangement, 
accepted  John  Simpson's  ten-day  note,  bearing  interest  at  7%,  for 
the  50  shares  of  stock  he  subscribed  for  on  Sept.  ist,  and  have 
issued  him  his  certificate  of  stock. 

Oct.  i.  An  invoice  of  $14,763  will  be  due  on  Oct.  loth.  As 
there  are  no  funds  on  hand  with  which  to  meet  the  debt,  the  Board 
of  Directors  have  levied  an  assessment  of  i%,  with  the  under- 
standing that  a  dividend  of  an  equal  amount  will  be  declared  as 


59 

soon  as  sufficient  outstanding  accounts  have  been  collected  to  war- 
rant the  payment. 

Prepare  the  assessment  list. 

Oct.  5.  Received  cash  in  full  for  assessment  of  Oct.  1st 
from  all  the  stockholders. 

Oct.  12.  E.  O.  Saunders  transferred  50  shares  of  his  stock 
to  E.  D.  Wise.  The  original  certificate  has  been  cancelled  and 
two  new  ones  issued. 

Oct.  1 6.  C  C  Steinman  sold  25  shares  of  his  stock  to  W. 
P.  Swanson,  the  proper  change  in  certificates  has  been  made. 

Oct.  18.  R.  A.  Brooks  has  sold  70  shares  of  stock  to  A.  B. 
Pendleton,  the  certificates  have  been  adjusted. 

Oct.  31.  Sufficient  funds  have  been  collected  to  meet  matur- 
ing obligations  and  to  return  the  assessment  of  the  1st  hist.  The 
Board  of  Directors  have  passed  a  resolution  authorizing  a  one 
per  cent,  dividend. 

Prepare  the  dividend  list. 

Nov.  i.  Mailed  checks  to  the  stockholders  for  their  divi- 
dends. 

Jan.  2.  Upon  closing  the  books  for  the  first  six  months,  they 
show  net  profits  amounting  to  $36,725.  The  Board  of  Directors 
have  declared  a  2%  dividend  and  have  given  instructions  to  carry 
the  remaining  gains  to  undivided  profits  account. 

Prepare  dividend  list. 

Jan.  5.  Checks  were  mailed  to  stockholders  for  the  dividend 
declared  Jan.  2d. 

EXERCISE  2. 

W.  J.  Coles  and  R.  C.  Sloat,  partners,  have  been  engaged  in 
a  general  merchandise  business.  They  have  decided  to  incor- 
porate and  have  arranged  with  A.  Stilson,  D.  W.  Walker,  I.  K. 
Crane  and  C.  O.  Goodwin,  to  take  stock  in  the  corporation.  At 
a  meeting  on  March  1st,  the  following  list  of  resources  and  liabili- 
ties was  submitted  by  Messrs.  Coles  and  Sloat :  Resources ;  cash 
$7826.93,  merchandise  $28,374.95,  furniture  and  fixtures 
$3786.40,  real  estate  $36,500,  accounts  receivable  $3764.18,  unex- 


6o 

pired  insurance  $231.  Liabilities ;  salaries  due  employes  $495. 60, 
accounts  payable  $15,369.70. 

The  above  resources  and  liabilities  were  accepted  as  listed 
and  it  was  decided  to  incorporate  under  the  name  of  The  Coles- 
Sloat  Co.  Messrs.  Coles  and  Sloat  each  to  receive  $40,000  in 
stock  at  par  for  their  former  business,  good  will  being  charged 
for  the  difference  between  their  present  worth  as  shown  by  the 
resources  and  liabilities  and  the  amount  allowed  them  in  stock. 
The  capital  stock  of  the  corporation  to  be  $100,000.  Messrs. 
Stilson,  Walker,  Crane  and  Goodwin  each  agreeing  to  take  $5000 
in  stock  at  par. 

Prepare  the  subscription  list. 

April  I.  Authority  to  commence  business  has  been  received 
from  the  Secretary  of  State.  The  books  used  in  the  partnership 
are  to  be  continued  in  the  corporation,  making  only  such  changes 
in  the  accounts  and  adding  such  new  books  as  are  necessary  under 
the  new  conditions.  A.  Stilson,  D.  W.  Walker,  I.  K.  Crane  and 
C.  O.  Goodwin  have  paid  their  subscriptions  in  cash.  All  certifi- 
cates of  stock  have  been  issued. 

Make  the  journal,  cash  book  and  stock  ledger  entries  for  the 
adjustment  of  the  partnership  books  to  the  new  conditions. 

Nov.  30.  Upon  closing  the  books  for  the  year,  it  is  found 
that  the  net  gain  is  $18,237.68.  The  Board  of  Directors  has  de- 
cided to  set  aside,  as  a  surplus  fund,  an  amount  equal  to  5  %  of  the 
capital  stock,  to  declare  a  dividend  of  13%,  and  to  carry  the  bal- 
ance of  the  gains  to  an  undivided  profits  account. 

Make  the  proper  entries. 

Dec.  5.  Checks  have  been  handed  to  the  stockholders  for 
the  dividend  declared  on  Nov.  3Oth. 

Jan.  3.  C.  O.  Goodwin  transferred  10  shares  of  his  stock  to 
L.  J.  Sinclair.  The  proper  adjustment  of  stock  certificates  has 
been  made. 

Jan.  16.  The  stock  and  store  were  damaged  by  fire  to  the 
extent  of  $25,000,  the  loss  being  fully  covered  by  insurance,  but 
in  order  to  avoid  any  delay  in  making  repairs  or  purchasing  new 


6i 

stock,  the  Board  of  Directors  has  levied  an  assessment  of  20%  on 
the  capital  stock. 

Prepare  assessment  list. 

Jan.  18.     Received  cash  in  full  of  assessment  of  the  i6th  inst. 

Feb.  15.  C.  O.  Goodwin  has  sold  his  remaining  stock  to  I. 
K.  Crane.  New  certificate  has  been  issued. 

July  i.  Due  to  the  death  of  R,  C.  Sloat,  on  June  28th,  his 
stock  has  been  transferred  to  the  Merchants'  Trust  Co.,  Trustee 
for  R.  C.  Sloat's  estate.  New  certificate  has  been  issued. 

Nov.  30.  Upon  closing  the  books  for  the  year,  the  net  gain 
is  found  to  be  $32,760.  The  Board  of  Directors  have  authorized 
a  dividend  of  30%,  the  remaining  gains  to  be  carried  to  undivid- 
ed profits. 

Dec.  5.  Checks  have  been  handed  to  the  stockholders  for 
the  dividend  declared  on  Nov.  3Oth, 

EXERCISE  NO.  3. 

On  June  5th,  W.  G.  Glenn,  C.  A.  Traine,  R.  S.  Gilbert,  M. 
T.  Walters,  Geo.  Squires  and  N.  H.  Kawston,  met  to  organize 
and  incorporate  the  Eldorado  Oil  Co.  The  following  conditions 
were  decided  upon;  Capital  stock  to  be  $100,000,  shares  $1.00 
each.  Stock  to  be  paid  for  in  ten,  equal,  monthly  installments. 
Each  incorporator  subscribes  for  10,000  shares  at  par.  Remain- 
ing stock  to  be  sold  later.  W.  G.  Glenn  to  receive  a  bonus  of 
3000  shares  of  stock  for  promoting  the  company,  R.  S.  Gilbert 
to  receive  4250  shares  of  stock  for  drilling  machinery  and  pipes 
turned  over  to  the  company,  and  C.  A.  Traine  to  receive  6000 
shares  of  stock  for  lease  of  oil  rights  on  Section  15  of  Morgan 
Township  for  three  years.  This  stock  is  included  in  their  sub- 
scription of  lo.ooo  shares  each. 

Prepare  subscription  list. 

June  24.  Received  authority  from  the  Secretary  of  State 
to  begin  business. 

July  i.  Issued  the  stock  in  payment  of  the  machinery,  lease 
and  bonus. 


62 

Received  cash  for  first  installment  on  subscribed  stock  and 
issued  installment  receipts  for  same. 

Aug.  i.  Received  cash  for  second  installment  on  subscribed 
stock  and  issued  installment  receipts  for  same, 

Aug.  27.  Sold  L.  C.  Borden  10,000  shares  of  stock  at  90, 
the  same  to  be  paid  for  in  ten,  equal,  monthly  installments.  Re- 
ceived the  first  installment  in  cash  and  issued  the  installment  re- 
ceipt. 

Sept.  I.  Received  cash  for  the  third  installment  on  the  in- 
corporators'  stock,  and  for  the  second  installment  on  L.  C.  Bor- 
den's  stock.  Issued  installment  receipts  for  same. 

Sept.  ii.  Geo.  Squires  has  transferred  his  installment 
script  to  N.  H.  Kawston.  The  original  installment  receipts  have 
been  cancelled  and  new  ones  issued. 

Oct.  I.     Received  cash  in  full  of  all  installments  due. 

Oct.  20.  Prospects  are  very  encouraging,  and  it  has  been 
decided  to  place  the  remainder  of  the  stock  on  sale.  The  follow- 
ing subscriptions  have  been  received :  R.  G.  Ross  10,000  shares 
at  $1.09  cash;  Z.  S.  Moss  5000  shares  at  $1.12  in  ten,  equal, 
monthly  installments;  C.  O.  Yates  5000  shares  at  $1.13  in  ten, 
equal,  monthly  installments. 

Oct.  23.  Received  cash  for  the  amounts  due  on  subscrip- 
tions of  the  2Oth  inst.,  and  issued  installment  receipts  and  certifi- 
cates of  stock  in  accordance  with  the  payments  received. 

Nov.  i.  Received  cash  in  full  for  one  installment  on  all 
installment  stock  subscriptions. 

Nov.  23.  L.  C.  Borden  transferred  5000  shares  of  install- 
ment script  to  Z.  S.  Moss.  The  original  script  was  cancelled  and 
new  script  issued. 

Nov.  25.  The  Board  of  Directors  has  declared  a  stock  divi- 
dend of  10%.  The  certificates  of  stock  for  same  have  been  issued 
to  the  stockholders  and  the  holders  of  installment  script. 

Dec.  i.  Received  cash  in  full  of  all  installments  due  and 
issued  installment  receipts. 

Dec.  20.  L.  C.  Borden  transferred  2500  shares  of  his  in- 
stallment script  to  J.  V.  Olsen. 


63 

•» 

Jan,  2.     Received  cash  in  full  of  all  installments  due. 

Jan.  8.  R.  G.  Ross  transferred  2500  shares  of  stock  to  J.  V. 
Olsen.  The  original  certificate  has  been  cancelled  and  new  ones 
issued. 

Jan.  10.  The  books  were  closed  on  Dec,  31  and  showed  a 
net  gain  of  $6273.  The  Board  of  Directors  today  declared  a  5% 
dividend,  payable  on  Jan.  15.  The  balance  of  the  gains  to  be 
carried  to  a  surplus  fund  account. 

Jan.  15.  Checks  were  mailed  to  the  holders  of  stock  and  in- 
stallment script,  in  full  for  the  dividend  declared  on  Jan.  10. 

EXERCISE  NO,  4, 

April  23.  W.  A.  Elder,  P.  R.  Stuart,  W.  E. 
Davis,  N.  O.  Coleman,  B.  A.  Roper  and  E.  G. 
Black,  have  received  from  the  City  Council  a  50- 
year  franchise  for  the  building  and  operating  of  an  electric, 
street  railway  over  various  streets  of  the  city.  They  decide  to  in- 
corporate and  sell  stock  to  cover  the  building  and  equipping  of  the 
road.  The  following  conditions  were  agreed  upon :  Corporate 
name  to  be  "The  Urban  Street  Railway  Company."  Capital  stock 
Si. 000,000,  of  which  $400,000  is  to  be  5%  preferred  stock  and  the 
balance  common  stock.  Shares  to  be  $100  each.  Above  named 
promoters  each  to  receive  $20,000,  at  par,  in  common  stock  and 
equal  amount,  at  par,  in  preferred  stock,  for  their  interest  in  the 
franchise. 

C.  A.  Wendell,  F.  O.  Rogers,  G.  T.  Tate,  L.  M.  Beacom,  P. 
K.  Swartz  and  A.  A.  Andrews,  each  subscribe  for  500  shares 
common  stock,  at  par,  to  be  paid  for  in  five,  equal,  monthly  in- 
stallments. 

Prepare  subscription  list. 

May  16.  Received  authority  from  the  Secretary  of  State 
to  begin  business.  Stock  is  issued  to  the  promoters  as  per  agree- 
ment (charge  Franchise  account).  Messrs.  Wendell,  Rogers, 
Tate,  Beacom,  Andrews  and  Swartz,  have  paid  the  first  install- 
ment on  their  stock  in  cash. 


64 

Prepare  journal,  cash  book,  installment  list,  installment 
ledger  and  stock  ledger  records. 

May  20.  Received  subscriptions  for  preferred  stock,  at  par, 
to  be  paid  for  in  five,  equal,  monthly  installments,  as  follows :  C. 
O.  Richey  100  shares,  T.  M.  Warren  50  shares,  I.  T.  Wood  200 
shares,  Dillon  &  McCann  100  shares,  Mrs.  A.  D.  Paulsen  100 
shares  and  E.  E.  Bayard  200  shares.  Each  paid  the  first  in- 
stallment in  cash. 

June  i.  Received  cash  for  the  second  installment  on  all 
installment  stock  subscribed  for  during  May. 

W.  A.  Elder,  W.  E.  Davis  and  B.  A.  Roper,  have  each  paid 
cash  for  250  shares  of  preferred  stock  at  97. 

June  8.  F.  G.  Black  has  paid  cash  for  400  shares  or  com- 
mon stock  at  96. 

July  i.  Received  cash  for  the  third  payment  on  all  install- 
ment stock  subscribed  for. 

July  12.  A.  A.  Andrews  transferred  200  shares  of  his  in- 
stallment script  to  Dillon  &  McCann. 

July  24.  Dillon  &  McCann  paid  cash  for  1400  shares  of 
common  stock  at  953^- 

Aug.  i.  Received  cash  in  full  for  the  fourth  payment  on  all 
subscribed  installment  stock. 

Aug.  25.  Received  $10,000  in  cash  as  a  bonus  for  extending 
the  car  line  on  West  Seventh  street  one  mile  beyond  the  city 
limits. 

Sept.  i.  Received  cash  for  the  fifth  and  last  payment  on  all 
installment  stock.  The  installment  script  has  been  taken  up  and 
the  stock  issued. 

Dec.  20.  As  additional  funds  are  needed  for  construction 
and  equipment  purposes,  the  Board  of  Directors  has  decided  to 
issue  $500,000  of  5%,  2O-year,  gold  bonds.  Bonds  each  to  be  for 
$1000  par,  dated  Jan.  2,  interest  payable  semi-annually.  The 
bonds  to  be  advertised  for  thirty  days  and  sold  to  the  highest  bid- 
der. Bids  to  be  opened  Jan.  31. 

Jan.  31.     The  highest  bid,  a  premium  of  9/3%,  received  for 


65 

the  bonds  was  from  the  firm  of  Kuhn,  Mansfield  &  Prior,  New 
York  City.  The  bid  is  accompanied  by  a  certified  check  for 
$50,312.50.  The  Board  of  Directors  have  accepted  this  bid  and 
taken  the  check  as  part  payment  for  the  bonds. 

Feb.  3.  T.  M.  Warren  has  transferred  all  his  stock  to  F.  G. 
Black. 

Feb.  27.  Received  from  Kuhn,  Mansfield  &  Prior,  cash  for 
the  balance  due  on  the  bonds. 

July  i.  Upon  closing  the  books  for  the  first  year's  busi- 
ness, it  is  found  that  the  profits  of  the  company,  exclusive  of  the 
dividend  on  preferred  stock  and  interest  on  bonds,  are  $18,225. 
The  Board  of  Directors  has  authorized  the  payment  of  the  an- 
nual dividend  on  the  preferred  stock  outstanding  out  of  the  pro- 
fits of  the  year's  business,  the  balance  of  the  profits  to  be  carried 
to  a  surplus  fund  account.  The  interest  on  the  bonds  to  be  paid 
and  carried  as  a  debit  in  the  interest  account  until  the  profits  are 
sufficient  to  cover  all  interest  and  preferred  stock  dividends. 

As  the  earnings  during  the  first  year,  when  the  construction 
and  the  equipping  of  the  road  was  taking  place,  are  small  the 
Board  of  Directors  has  declared  a  preferred  stock  dividend  to  the 
holders  of  the  common  stock;  giving  two  shares  of  preferred 
stock  to  each  holder  of  common  stock  for  every  100  shares  owned 
by  him. 

Jan.  2.     Paid  one-half  year's  interest  on  bonds, 

June  28.     Paid  one-half  year's  interest  on  bonds. 

July  i.  Upon  closing  the  books  for  the  second  year,  the 
gain,  exclusive  of  the  dividend  on  the  preferred  stock,  is 
$62,375.40.  The  Board  of  Directors  has  set  aside  $10,000  of  the 
gain  as  a  sinking  fund,  authorized  the  payment  of  the  annual  divi- 
dend upon  the  preferred  stock  and  a  6%  dividend  on  the  com- 
mon stock,  the  remainder  of  the  profits  to  be  divided  equally  be- 
tween the  surplus  fund  and  undivided  profits  accounts.  They 
have  also  declared  a  preferred  stock  dividend,  in  favor  of  all  the 
stockholders,  at  the  rate  of  ten  shares  of  preferred  stock  for  each 
100  shares  of  stock,  either  kind,  owned  by  the  stockholders.  This 


66 

dividend  not  to  apply  on  the  shares  of  stock  previously  issued 
as  a  dividend.  As  the  franchise  is  now  developed  and  on  a  good 
earning  basis,  the  Board  of  Directors  have  decided  to  charge 
this  stock  dividend  to  the  franchise  account. 

Oct.  10.  At  an  election  today,  the  voters  of  the  city  have 
authorized  an  issue  of  bonds  by  the  city  for  the  purpose  of  buy- 
ing the  street  railways,  which  will  hereafter  be  operated  as  a 
municipal  enterprise. 

Dec.  i.  The  city  has  today  taken  charge  of  the  street  rail- 
ways and  has  made  the  following  settlement  with  the  company: 
The  city  assumes  the  bonded  indebtedness  of  the  company,  and 
has  paid  the  company  $1,250,000,  in  cash,  for  its  franchise,  equip- 
ment and  complete  business  interests. 

Dec.  2.  After  closing  all  accounts,  excepting  Cash,  Capital 
Stock  and  Loss  and  Gain,  these  accounts  are  as  follows :  Cash 
debited  $1,313,964,  Capital  Stock  credited  $1,000,000  and  Loss 
and  Gain  credited  $313,964.  Retire  the  stock,  divide  all  funds 
among  the  stockholders  (preferred  and  common  stockholders  will 
share  equally),  thus  adjusting  these  accounts. 


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